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Gold Price Edges Higher as Powell Expects Fed to Do More

Gold Price Edges Higher as Powell Expects Fed to Do More

Rich Dvorak, Analyst

GOLD FORECAST: GOLD PRICE EDGES HIGHER AS FED CHAIR POWELL SAYS MORE SUPPORT NEEDED FOR ECONOMY, BALANCE SHEET TO KEEP EXPANDING

  • Gold prices lifted higher off intraday lows after FOMC officials and Fed Chair Powell relayed an ominous message in the latest central bank update
  • Gold remains supported around the $1,700 price level with the precious metal boosted by Fed asset purchases and balance sheet growth
  • Gold price action might extend its surge considering more liquidity and monetary policy firepower from the Fed is likely on the horizon

Gold performance just turned positive on the day with gold futures and spot XAU/USD price action trading back above the $1,710 level. The precious metal received a boost from the latest FOMC rate decision and follow-up press conference led by Fed Chair Jerome Powell.

GOLD PRICE CHART: 15-MINUTE TIME FRAME (29 APRIL 2020 INTRADAY)

XAUUSD Price Chart Gold Forecast FOMC Decision Fed Chair Powell

Chart created by @RichDvorakFX with TradingView

Gold prices look set to recommence their upward ascent with Fed asset purchases, and its balance sheet, expected to continue for the foreseeable future. Regarding the coronavirus pandemic, and its crippling impact on the economy, the Fed meeting press statement inject skepticism over the ‘V-shape’ recovery anticipated by the majority of market participants.

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Moreover, Fed Chair Powell said how the FOMC will likely need to provide more support if the US economy is to bounce back in a robust manner. Powell also stated how the Federal Reserve is ‘not going to be in any hurry’ to change its current monetary policy stance by raising rates or withdrawing recent liquidity measures.

GOLD PRICE CHART: 4-HOUR TIME FRAME (23 MARCH TO 29 APRIL 2020)

Gold price chart gold forecast XAUUSD technical analysis Fed meeting

Chart created by @RichDvorakFX with TradingView

Gold price action nevertheless appears to have formed a wedge chart pattern. This comes as the precious metal coils like a spring between its short-term bearish trendline and medium-term bullish trendline. As such, spot XAU/USD might maintain its recent trading range between technical support and resistance around the $1,700 and $1,750 levels respectively.

Gold MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 3% -7% 1%
Weekly -6% -1% -5%
What does it mean for price action?
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While surging gold prices may experience intermittent headwinds, as the precious metal runs into intimidating technical barriers or comes under brief selling pressure, bullion is expected to continue its broader advance. On that note, as the coronavirus recession looms and liquidity gushes, there is potential that the Federal Reserve and Fed Chair Powell just catalyzed the next breakout higher in gold price action.

-- Written by Rich Dvorak, Analyst for DailyFX.com

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.

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