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Gold Price Forecast: XAU/USD whipsawed but leans towards trendline support on Fed hike

 

  • Fed hikes rates by 25bps as expected.
  • Gold price whipsawed in Fed volatility as the market awaits Fed's chair, Powell.
  • Gold price leans towards trendline support, $1,963 and $1,975 are the breakout levels. 

The Gold price has been whipsawed after the Federal Reserve, Fed, raised its interest rate decision by a 25 bps rate hike to 5.25-5.50%, as expected. At the time of writing, Gold is volatile between $1,973 and $1,965 so far as the market digests the statement and key points as follows:

Federal Reserve statement, and key notes

 

  • Fed says FOMC vote was unanimous.
  • CBO revises 2023 us real Gross Domestic Product growth forecast to 0.9% from 0.1% forecast in Feb due to H1 labour market strength.
  • Fed: Will consider extent of additional firming to curb inflation.
  • Fed: We will continue to reduce our bond holdings as described in previously announced plans.
  • Fed: Tighter credit conditions are likely to weigh on economic activity, hiring and inflation, extent to which remains uncertain.
  • Fed: Recent indicators suggest economic activity has been expanding at a moderate pace vs a modest pace in June statement.
  • Fed: We will continue to assess additional information and its implications for policy.
  • Fed: Banking system is sound and resilient.

As a result of the statement:

  • Interest rate futures put chance of Fed hike at 18% in September, 36.5% in November post-FOMC.
  • Probability of Fed hike was 18.9% in Sept, 37.3% in nov pre-FOMC.

Watch Fed's chair Powell live

Traders now await to hear from the Chairman, Jerome Powell who will be speaking to the press at the top of the hour. 

The hawkish outcome could be that:

''Chair Powell emphasizes that actions taken since March have prevented credit conditions from tightening significantly. Meanwhile, labour market conditions and consumer spending remain too strong. Powell signals that more interest rate increases are likely needed,'' analysts at TD Securities said.

The base case, the analysts said:

''We expect Chair Powell to reiterate that the Fed remains data dependent and that economic data since the June FOMC meeting is yet to show convincing signs of slowing (despite nascent evidence of cooling inflation). Powell will also underscore that September is a “live” meeting.''

Dovish scenario, the analysts said:

''Powell mentions that the best course is to be patient given the totality of policy tightening and the ongoing reduction of credit supply. The chair plays up the recent deceleration in inflation as a positive sign and suggests that a soft landing is becoming more likely.''

Gold price technical analysis

Ahead of the Fed, daily and 15 min chart:

Gold price update, after Fed statement and interest rate decision: 

So far, the price holds in bullish territory while on the front side of the trendline and above yesterday's highs and the day's low. $1,963 and $1,975 are the breakout levels. 

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