Gold Price Forecast: XAU/USD hovers inside the key $1,855-80 zone as bears await Fed’s showdown

Gold Price Forecast: XAU/USD hovers inside the key $1,855-80 zone as bears await Fed’s showdown Close

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  • Gold prices fade the previous day’s bounce off important support amid failures to cross short-term resistance confluence.
  • Sentiment dwindles as traders anticipate Fed to match already priced in forecasts, off in China, Japan restricts moves.
  • US ISM Services PMI, ADP Employment Change will also be important for trading directions.

Gold (XAU/USD) picks up bids to $1,865 within a strong trading range of $25 amid a pre-Fed trading lull. That said, the yellow metal bounced off a three-month low surrounding $1,855 the previous day before retreating from the $1,880 resistance confluence. Both these levels define the short-term trading range of the bullion as traders await the all-important Federal Open Market Committee (FOMC).

The metal’s latest weakness could be linked to the US dollar’s refrain from extending Tuesday’s pullback, as well as an absence of major catalysts amid holidays in China and Japan. However, broad expectations that the Fed will refrain from crossing the previously defined hawkish boundaries, amid challenges to the economy emanating from the Russia-Ukraine crisis and covid resurgence, seem to keep the gold buyers hopeful around a multi-month-old support line.

It’s worth noting, that the US Dollar Index (DXY) remains steady around a 20-year high, unchanged at 103.50, whereas the S&P 500 Futures print a three-day rebound from the yearly low, up 0.08% intraday by the press time. The US Treasury yields, however, remain unchanged after the previous day’s pullback to 2.97% as holidays in China and Japan restrict bond moves in Asia.

Although the European session may offer fresh life to the Treasury yields and can help move the XAU/USD prices, the cautious mood ahead of the US Federal Reserve (Fed) verdict may keep the metal traders on their toes.

Should the Fed match broadly priced-in market forecasts, the gold prices may recover and could cross the immediate hurdle surrounding $1,880, which in turn could confirm a short-term bullish trajectory. Though, any surprise won’t be taken tightly and hence need to be traded with caution. In addition to the Fed’s action, April’s outcome of the US ISM Services PMI and ADP Employment Change, as well as geopolitical and covid-linked headlines, will also be important to forecast gold moves.

Technical analysis

Having failed to cross the $1,880 resistance confluence, including the 100-DMA and 50% Fibonacci retracement (Fibo.) of August 2021 to March 2022 upside, gold eyes to retest the nine-month-old ascending support line, around $1,855 by the press time.

While the bearish MACD signals and failures to cross the $1,880 hurdle keep sellers hopeful, a limited room appears on the downside as RSI approaches the oversold territory.

Even if the gold bears manage to conquer the $1,855 support, the 200-DMA and 61.8% Fibo. will challenge the precious metal’s further downside near $1,834.

On the flip side, XAU/USD recovery beyond $1,880 will need validation from March’s low of $1,890 and the $1,900 threshold before highlighting the 50-DMA level of $1,936 for the bulls.

Gold: Daily chart

Trend: Limited downside expected

Additional important levels

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Written by
Nathan Tarrant
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Written by Nathan Tarrant