Gold Price Prediction – Prices Surge on Surprise Fed Rate Cut

Gold prices surged higher on Tuesday as the Federal Reserve surprised market participants with a 50-basis point interest rate cut. The Fed has not performed an inter-meeting cut since 2008 during the great financial crisis. The Fed pointed to the uncertainty over the coronavirus and is trying to head off a decline in economic activity when or if the virus spreads across the United States. The US 10-year yield moved below 1% for the first time in history, which weighed on the US dollar and paved the way for higher gold prices.

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Gold prices surged higher rising 3.5% breaking through short term resistance and poised to test the February highs at 1,690. Short term support is seen near the 10-day moving average at 1,618. Additional resistance is seen near the 50-day moving average at 1,573.

Medium-term momentum is neutral. The whipsaw price action has not allowed momentum to accelerate. The MACD recently generated a crossover sell signal and is now poised to generate a buy signal.  The downward momentum of the fast stochastic seems to have halted which also reflects decelerating momentum and consolidation.

The Fed Cut Rates

The Federal Reserve cut interest rates by 50-basis points in a surprise move to stem the decline in economic growth driven by the coronavirus. While the market has already priced in a 100% chance of a 25-basis point cut in March and had priced in a total of 75-basis points of lower rates by the end of 2020, the participants were surprised by the timing.