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Is the Retreat Over as Gold Price Jumps Above $2,300 After the FOMC?

Gold prices experienced a decline two weeks ago and continued to drop this week, with spot gold reaching $2,281.20 per ounce but bounced above $2,300 after the FED. This marked a significant decrease from the previous day’s positions, which were above the $2,300 mark. The downturn can be attributed to broader market concerns about a potential aggressive stance from the Federal Reserve. However, such fears were not realized yesterday, leading to a decrease in the USD and an increase in the price of gold.

Gold starting to shine again after the FED

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Investors took Jerome Powell’s comments with a positive attitude, leading to a decline in the USD and an increase in everything else, from safe havens such as GOLD and the HCF, to risk assets such as commodity dollars and stock shares. Powell indicated that the next policy adjustment is unlikely to involve a rate hike, easing concerns surrounding this possibility and putting downward pressure on the USD. Consequently, XAU/USD experienced a surge, reaching the daily high at $2,328.20.

Gold Chart H4 – The 200 SMA Held As Support

Recent robust US economic data, especially the inflation figures, including a surprising uptick in the employment cost index earlier this week, indicated that inflationary pressures are likely to endure. In response, investors feared a rate hike comment from Powell yesterday, which weighed on gold prices, sending them to $2,281.20.

No More FED Interest Rate Hikes Improved Risk Sentiment

But the 200 SMA (purple) held as support and Gold started to bounce higher from there even before the FOMC rate decision. Yesterday in the evening, gold surged beyond $2,325 as the Federal Reserve decided to keep interest rates unchanged. The Fed maintained the federal funds rate at 5.25%-5.50% and announced a reduction in the pace of balance-sheet reduction from $80 billion to $30 billion.

Fed Chair Jerome Powell also dismissed the idea of further interest rate hikes which was what drove most of the bullish move in XAU, but on the other hand, also refrained from providing forward guidance on interest rate cuts for the rest of the year. Gold surged close to $2,330, but the 50 SMA (yellow) held as resistance in the first attempt. So, we will see how it goes from here on, but the road higher should be choppy as well.

Gold Live Chart

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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