Gold Prices Forecast: XAU/USD Rises as Yields, Dollar Fall After Fed’s Rate Hold

Highlights

• Gold (XAU/USD) rallies on weak dollar and tumbling Treasury yields after Fed’s interest rate decision.
• Investors speculate an end to the Fed’s rate hikes, boosting gold’s allure as a safe-haven asset.
• Powell hints at possible December rate hike but emphasizes commitment to 2% inflation target.

Gold Reacts to Federal Reserve’s Decision

Gold (XAU/USD) prices climbed on Thursday, capitalizing on a weakening U.S. dollar and a decline in Treasury yields. This surge was a response to the Federal Reserve’s decision to maintain steady interest rates, leading many investors to speculate that the central bank’s era of rate hikes might be drawing to a close. The recent performance of the precious metal seems to reaffirm its position as a reliable refuge during tumultuous financial and geopolitical periods.

Federal Reserve’s Stance on Rate Hikes

The Federal Reserve’s decision to retain the current interest rates was anticipated. The central bank’s statement highlighted the robust pace of economic activity in the third quarter, although acknowledging a moderation in labor market gains. During a subsequent press conference, Chairman Jerome Powell intimated the possibility of a December rate hike, while also emphasizing the bank’s ongoing commitment to achieving its 2% inflation target.

Turbulence in the Treasury Yields

Following the Fed’s announcement, there was a significant drop in Treasury yields. The 2-year Treasury yield dipped below 5%, marking an 11 basis point fall to 4.96%. Concurrently, the 10-year Treasury yield also saw a similar decline, settling at 4.766%. These shifts underline the market’s reactive nature to the central bank’s policies and statements.

Gold’s Key Position Amidst Uncertainty

Gold’s ascendancy above the significant $2,000-per-ounce threshold last week showcases its role as a stabilizing asset amidst geopolitical upheaval, especially the escalating tensions in the Middle East. The rise in holdings of SPDR Gold Trust, the world’s premier gold-backed exchange-traded fund, further bolsters this sentiment.

Outlook: Bullish Prospects for Gold

Given the ongoing volatility and gold’s proximity to the $2,000 mark, there’s potential for the metal to revisit this level. As the market gears up for the impending U.S. non-farm payrolls report, it will be eagerly observing any hints about the Federal Reserve’s future interest rate strategy. The current climate suggests a bullish outlook for gold in the short term.

Technical Analysis

Gold’s (XAU/USD) current daily price of 1984.815 suggests a slight bullish momentum from its previous close of 1982.355. While hovering above both the 50-day moving average (1919.382) and the 200-day moving average (1933.615), it indicates a strong upward trend.

Currently situated between its minor resistance at 1987.00 and its minor support at 1952.21, it’s approaching a crucial resistance level at 2009.00.

Given the prevailing market data, especially the positioning above both critical moving averages, the sentiment is bullish. The next significant test for the asset will be its ability to break the main resistance level.