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It has been a big Wednesday for gold. FOMC decision should help convince Wall Street that a peak in Treasury yields (10-year) is in place. The Fed is still committed to fighting inflation and the market is getting very close to pricing in peak tightening.
Gold looks like it could continue to stabilize now that Wall Street is starting to become convinced that there is only a need to see three more FOMC rate hikes before policymakers are done. Until inflation shows additional signs of easing, gold will struggle to deliver a major breakout higher.
Gold price is hovering within a $1,733.12-1,736.00 range after facing weak blockades at around $1,740.00. Fed’s mild hawkish commentary has resulted in an upbeat market sentiment.
Gold price has turned into a consolidating trajectory after a mild correction while attempting to surpass the critical hurdle of $1,740.00.
Earlier on the day, the precious metal displayed a juggernaut rally from a low of $1,720.00 after the Federal Reserve (Fed) announced an interest rate hike by a consecutive 75 basis points.
Taking into consideration the soaring price pressures and softening retail demand, Fed chair Jerome Powell decided to maintain the status quo and elevated the interest rates to 2.25-2.50%. Apart from that, the guidance doesn’t seem extremely hawkish as Fed policymakers are seeing interest rates near 3.5% by the end of CY2022.
A mild hawkish commentary from the Fed has turned out to be music to the ears for the gold bulls. This has also underpinned the risk-on market mood as the market participants are joyful that Fed has at least a decent target for this year.
Also, the Fed stated that the labor market is extremely solid and the unemployment rate is low, which has supported the Fed to announce rate hikes unhesitatingly.
Meanwhile, the US dollar index (DXY) has plunged below the cushion of 107.00 significantly. The DXY is expected to extend its losses after a downside move below 106.20.
Technically, on an hourly scale, the gold price has given an upside break of a descending triangle pattern whose downward-sloping trendline is placed from July 22 high at $1,739.37. While the horizontal support is placed from July 22 low at $1,712.94.
A meaningful bull cross represented by the 20-and 50-period Exponential Moving Averages (EMAs) at $1,719.36, adds to the upside filters.
Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, which advocates a sheer upside momentum ahead. The major question now is: Will gold prices go higher, lower or remain unchanged next week?
