The US dollar suffered a strong setback in the markets because of the announcement by the US Federal Reserve yesterday to keep US interest rates unchanged with a date for rate cuts next year. Thus, this allowed the gold price XAU/USD to rebound sharply and quickly to the resistance levels of 2027 dollars and 2040 dollars per ounce at the time of writing the analysis. Moreover, before the announcement of the Federal Reserve's decisions, the gold price was exposed to profit-taking selling that pushed it towards the support level of 1973 dollars per ounce. Therefore, we had recommended at the time to buy gold from every downward level. With the continuation of global geopolitical tensions and the abandonment of the tightening path by the global central banks, this is a good environment for the recovery of gold prices.
Furthermore, the Federal Reserve left the key US interest rate unchanged on Wednesday for the third time in a row. Also, its officials indicated that they expect to make cuts of a quarter of a point in the benchmark interest rate next year. Clearly, the Fed's message yesterday strongly indicated that it is done raising interest rates - after the fastest increases in four decades - and is close to cutting rates as early as next summer. Speaking at a news conference, Federal Reserve Chair Jerome Powell said it was likely that Fed officials were done raising interest rates because of how steadily inflation had slowed. “Inflation is continuing to decline, and the Labor market is continuing to return to balance, so far so good,” Powell added, after the Federal Reserve’s 19-member policy committee finished its latest meeting.
In Wall Street, investors celebrated the possibility of future interest rate cuts. Consequently, stock prices rose, and bond yields fell after the Federal Reserve issued its statement and Powell held his press conference. Nearby, Wednesday witnessed a significant shift in the expectations of the U.S. central bank regarding interest rates and the economy. Just two weeks ago, when Powell stated that it was "premature" to conclude that the Federal Reserve had finished raising the benchmark interest rate or to speculate about cuts in this rate.
Moreover, he indicated that the Fed is almost certainly done raising interest rates. Meanwhile, he admitted that officials discussed the possibility of lowering interest rates at their meeting. He also admitted that his warning, in a high-profile speech last year, that the “pain” of rising unemployment would accompany a sharp decline in inflation was overly pessimistic. Instead, US inflation slowed significantly towards the Fed's 2% target, even while unemployment remained at 3.7% and the pace of layoffs was low. Finally, Powell added that the Fed realizes that keeping interest rates high for too long, and waiting too long to lower them, could put the economy at risk.
Gold Price Forecast and Analysis Today:
As we mentioned before, the return of the gold price XAU/USD to stability above the psychological resistance of 2000 dollars per ounce is a strong support for further bull dominance of the trend. At the same time preparing to return to the record levels, the closest of which is currently 2055 and 2080 dollars, respectively. therefore, if the weakness of the US dollar continues and the rest of the global central banks abandon the path of tightening monetary policy today. Concurrently, according to the performance on the daily chart below, the support level of 1985 dollars per ounce will remain the key to the start of bear dominance again.
Today, the Swiss National Bank, the Bank of England, and the European Central Bank will announce updates on their monetary policy. Finally, that’s will be followed by the announcement of US retail sales figures.
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