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XAUUSD Gold Forecast: Will FED meeting be the catalyst?

XAUUSD Gold Forecast: Will FED meeting be the catalyst?

What could drive Gold prices higher? Because XAUUSD needs a catalyst to go higher

  • Changes in the trade-weighted US Dollar. Weak USD. / Not yet
  • Negative interest rates / No
  • Changes in nominal yields on10-year U.S. Treasuries / Not supportive for Gold at the time being
  • US Economic Data / Not too weak to support gold prices.
  • Supply and demand / Physical demand are not too strong at the time being.
  • Global Uncertainty / Brexit seems to be out of the scenario for a while.

XAUUSD ended the week above the psychological level of $1,300. However, Gold needs a catalyst to ho higher to break above $ 1.312.

I am trying to find out at least one catalyst. ( I am a Gold Bull in the long run but our Gold rally is likely to be postponed for a while. )

The market is lacking conviction for higher prices. Resilience in equity markets is making gold a less attractive alternative for investors. The S&P 500 has broken above the psychological level at 2,800, and ended the week at 2824 points, up 3% from the previous week.

A potential catalyst which Brexit could bring is out of the scenario for a while. Right now there appears to be no major need for an insurance policy so investors are shunning gold and turning to equities.

The last hope is much more dovish FED. All eyes will be on the FED  as it holds its monetary policy meeting next week and along with its interest rate decision will release updated economic projections. Market players are also expecting the central bank to unveil its plan to top its balance sheet reduction program.

The FED is likely to revise down the median growth projection. But I believe that the market has priced this revise already.

After the last dovish FED monetary policy statement, XAUUSD re-tested $ 1.350 but failed the break above. I have mentioned before that a new story is needed. This catalyst can be a weak USD, not a dovish FED. If gold is going to go higher we need to see weaker U.S. data. The U.S. economy still appears strong compared to the rest of the world and that is keeping the U.S. dollar bid

I do not expect the FED to be anywhere near dovish as the ECB was two weeks ago when it surprises markets with a shift in its forward guidance, not expecting to see any rate hike until at least the end of the year. ( Which was not surprising to me )

And one more thing: There is a risk that the Fed sounds hawkish as it downplays a potential slowdown in the domestic economy. More clear; if the Fed says that it’s downgrading its growth because of risks in the global economy or anything along those lines that could make them sound a little hawkish. This would support equity markets and put Gold prices under bearish pressure.

In any case, gold remains an attractive safe-haven asset as global economic uncertainty builds long run. If we see a significant drop on the gold prices towards $1.260 – $1.250, it would find strong buyers appetite there. On the back of slowing global economy, I don’t see a lot of reasons to be overly bearish on gold.

Technically;

I will go over the H4 Chart which we have published on Thursday. XAUUSD broke the bearish flag pattern and tested $1.292. Gold prices recovered on Friday and retested the broken line. The pattern remains valid as long as the prices fail to make H4 closing above $1.307. If Gold price breaks below $1.296, it is likely to test $ 1.290. Break below $1.290 may start a sell-off towards $1.277 and $1.269. Technical target of the formation is $1254.

On the upside, a firm breakout of $1.308 would send the price towards $ 1.320. As I mentioned in the fundamental analysis, a catalyst is needed for a sustainable bullish move.

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XAUUSD GOLD:  Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. Chartreaderpro does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility

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