Gold Price Forecast: Powell’s Remarks Open Door to Heightened Volatility

Highlights

• Gold prices surged on a weaker dollar post-Fed rate hike.
• Fed’s balanced perspective hints at possible future rate hikes.
• Market volatility depends on upcoming economic data.

Overview

Comex gold prices surged to a one-week high on Thursday, bolstered by a slightly weaker dollar following the widely anticipated interest rate hike announced by the U.S. Federal Reserve. Federal Reserve Chair Jerome Powell’s comments offered a balanced perspective, indicating the possibility of another rate hike later in the year. This outlook could result in some volatility for gold prices, with a potential upward movement, depending on forthcoming economic data.

Powell Leaves Additional Rate Hike on Table

The Fed’s decision to implement a 25 basis point hike pushed interest rates to their highest level since 2001. However, Powell’s remarks suggested that the central bank may also consider keeping rates steady at this level, depending on the economic indicators, making future meetings ‘live’ events. The Fed is closely monitoring inflation, which is currently above their 2% longer-range goal, but Powell reiterated the central bank’s commitment to restoring price stability.

Although the possibility of another rate hike is still on the table, Powell’s assurance that the Fed is no longer forecasting a U.S. recession was comforting to investors. As gold is sensitive to rising interest rates due to the increased opportunity cost of holding non-yielding bullion, the market responded positively to the news.

Additionally, the dollar index’s decline further supported gold prices, as a weaker dollar makes gold more affordable for holders of other currencies.

US Economic Data, ECB Policy Decision on Tap

Looking ahead, the focus will shift to the United States’ gross domestic product report for the second quarter and the European Central Bank’s policy decision. The ECB is expected to raise rates for the ninth time and then adopt a “data-dependent” approach. Traders will also be monitoring the Japanese central bank’s actions regarding its yield control program.

Short-Term Forecast:  Data Dependent

Overall, gold prices remain subject to the influence of economic data and central bank decisions, making it essential for traders to stay vigilant and responsive to market developments in the short term.

Technical Analysis

Comex Gold sentiment is bullish as the current 4-hour price of 1976.10 is trading above both the 200-4H moving average at 1949.20 and the 50-4H moving average at 1969.70, indicating an upward trend. The 14-4H RSI reading of 59.16 suggests moderate bullish momentum, signaling strength without being overbought.

The market is approaching the main resistance area between 1980.00 and 2000.50, suggesting potential further upward movement. Traders should closely watch the market’s reaction to this zone for future guidance.