Gold Price Forecast – Fed Rate Decision Under Focus

Gold prices were showing some recovery signs today. However, upcoming significant events will decide the ultimate magnitude for a probable upside move.

gold-is-money

Gold prices closed negative last week, staying within 1450.78/1475.48 range. Friday’s massive sell-off signified the market reaction over US economic data. As a fresh start for this week, gold prices were showing some recovery signs today. However, upcoming significant gold catalyst events will decide the ultimate magnitude for a probable upside move.

What’s Next in US-Sino Trade Dispute

Washington plans to impose additional tariffs on Beijing by the end of this week. Meanwhile, China still hopes that it can reach an agreement with the US ahead of that. We all know that a proper deal will happen only if both parties agree. Right now, both the US and China are aiming to accomplish the so-called “Phase 1” of the trade deal. But, the probabilities for a quick deal remains low.

Nevertheless, global investors continue to grow worried ahead of the upcoming US tariffs. These new tariffs would be targeted over Chinese-made cellphones, laptop computers, toys, and clothing. If these tariffs are set into action, it will have a dramatic impact on the world markets.

Such a scenario would Gold an extremely powerful boost, if it were to materialize.

Fed’s Rate Cut Decision on the Cards This Week

Policymakers are expected to meet later this week to decide what to do with the interest rate. This year, the Bank has already cut the rates thrice. Over time, the Bank might lack the required firepower, unable to cut rates further. Hence, as the policymakers would meet for the last time in 2019, Fed Chair Powell expects the interest rate to stay within the range of 1.50/1.75%.

Technical Analysis

1-Week Chart

Though the XAU/USD pair trades in the lower region of the Bollinger Bands (BB), probabilities remain high for an immediate upward drift. Interim, the Parabolic SAR seems to approach the pair from the top, aiming to go below the pair in the coming days. Also, any movement to the downside would immediately trigger the underlying slanting support line.

XAU/USD 1 Week 09 Dec' 2019
XAU/USD 1 Week 09 Dec’ 2019

At present, the pair trades with a slightly lower momentum of around 40 levels. Any move above 50 levels in the Stochastic Oscillator would please the bulls.

1-Day Chart

On the daily chart, I can see a death cross formation occurred on Dec’ 2. The 50-day SMA has moved below the 100-day SMA. It seems like the medium-term uptrend is exhausting and, fresh near-term slips are underway. Hence, a breakout above 1479.30 level would be a critical turning point for the gold prices in the upcoming days.

XAU/USD 1 Day 09 Dec' 2019
XAU/USD 1 Day 09 Dec’ 2019

Nonetheless, the most significant 200-day SMA continues to remain below the pair, strengthening the bullish prospects.