Gold Price Prediction – Gold Breaks Out Following Decision

Gold prices broke out as US yields slipped lower following the Fed’s decision to keep rates unchanged, and a downward revisions to future rates. The Fed’s average dot plot, which is graph of future interest rate levels, dropped significantly, as Fed governors readjusted their thinking. The new projections now show 1-fed officials seeing at leave 25-basis points by the end of the year and 7, that see rates lower by 50-basis points. Eight fed governors see rates unchanged through the balance of the year. The decision allowed the dollar to ease paving the way for lower gold prices.

Technical Analysis

Gold prices broke out hitting fresh 18-months highs and closing near 1,359. Support is seen near the former break out level at 1,346. Resistance is seen near the 1,370-1,375 region and then 1,392, and up to 1,423. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal. The current reading on the fast stochastic is 86, above the overbought trigger level of 80, which could foreshadow a correction. The RSI (relative strength index) which is a momentum oscillator also broke out which reflects accelerating positive momentum. The current reading on the RSI is 75, above the overbought trigger level of 70, which could foreshadow a correction. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices.

The Fed Leaves Rates Unchanged

The Fed left rates unchanged as expected. What was unexpected was that eight FOMC members now see rate cuts this year as appropriate versus none in March.  That number rises to nine in 2020.  The end-2019 median Fed Funds remains at 2.375%, but the end-2020 median dropped to 2.125% down 50-basis points from March.  The Fed tweaked its economic forecasts raising GDP slightly to 2.1% and then declining to 2%, which is higher than the 1.9% increase they say in March.