Gold Price to Resume Ascent as Fed Asset Purchases Balloon
GOLD PRICE, GOLD FORECAST & GOLD NEWS: FED QE PROGRAM TO BOOST BULLION
- Gold price action looks primed to resume its near-vertical climb as liquidity is restored
- Gold exploded over 3% in response to ‘extensive new measures’ from the Fed
- Gold could rise with the FOMC able to purchase an unlimited amount US Treasuries
After the recent stock market rout pressured gold more than 10% lower, the precious metal might be set to resume its parabolic ascent. Gold is on pace for its biggest intraday gain since June 2016 as spot prices soar over 3.5% while virus-induced recession fears swell.
GOLD PRICE CHART: 5-MINUTE TIME FRAME (23 MARCH 2020 INTRADAY)
Gold price action started to skyrocket this morning after mind-boggling news from the Federal Reserve crossed the wires. The US central bank, or Fed, detailed extensivenew monetary policy tools in aims of countering the worrisome spike in recession risk largely attributed to economic fallout from the coronavirus pandemic.
Specifically, the Fed revealed unprecedented measures that allows the FOMC to purchase US Treasuries and agency mortgage-backed securities “in the amounts needed.” With the Federal Reserve announcing unlimited QE, the Fed balance sheet is likely set to explode, which reinforces the thesis that gold could soon near record highs.
GOLD PRICE CHART: DAILY TIME FRAME (AUGUST 2019 TO MARCH 2020)
Spot gold (XAU/USD) has rebounded by 7.5% since the March 16 swing low around the $1,460/oz price. In addition to technical support provided by the November and December 2019 lows, this level roughly aligns with the 200-day simple moving average as well.
Gold faces a series of technical barriers that may hinder a prolonged rally as the precious metal retraces its month-to-date trading range, however. The $1,555 price zone – underpinned by last year’s high – stands out as the first obstacle faced by spot gold. This technical level is also highlighted by the 38.2% Fibonacci retracement of the 15% drop between March 09 and March 16.
That said, amid extreme volatility and wild price swings, holding above this area could provide confirmation that the pullback in gold might be over, and perhaps XAU/USD will continue rebounding higher. Beyond the $1,555 level brings to focus the 50-day simple moving average and $1,585 mark. The 78.6% Fibonacci retracement and $1,645 price could also thwart a sustained move to the upside before gold bulls target year-to-date highs slightly above $1,700.
Connect with @RichDvorakFX on Twitter for real-time market insight
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.