Gold gains traction above $2,000 as dovish Fed comments weaken US Dollar

Gold surges above $2,000 during the early Asian session on Thursday. The weaker US Dollar and Treasury yield after the Federal Reserve (Fed) meeting boost the yellow metal. The XAU/USD price is trading at $2,020, up 0.16% on the day.

Technical Overview

XAU/USD is little changed for a second consecutive day, although it posted a lower low and a lower high on Wednesday. The daily chart shows that the pair extended its weekly decline to $1,973.00, the immediate support level. The pair develops midway between a mildly bullish 20 Simple Moving Average (SMA) at around $2,010 and directionless 100 and 200 SMAs, over $ 40 below the current level. Finally, technical indicators head nowhere just below their midlines, reflecting the absence of speculative interest.

Technical readings in the 4-hour chart favor a downward extension. XAU/USD develops below all its moving averages, with the 20 SMA heading firmly south after crossing below the longer ones. Meanwhile, technical indicators remain below their midlines with uneven slopes, although also reflecting absent directional interest.

Support levels: 1,973.00 1,959.40 1,946.00

Resistance levels: 1,994.40 2,001.70 2,014.20

Fundamental Overview

Gold prices see no action on Wednesday, with XAU/USD still stuck around $1,980.00. Financial markets are in wait-and-see mode ahead of the Federal Reserve (Fed) monetary policy announcement, the last one for 2023. Back in September, the Summary of Economic Projections (SEP) or dot plot, indicated that officials were still anticipating a terminal rate higher than the current 5.25%-5.50% interest rate. Still, policymakers refrained from hiking rates in the last two meetings, and the odds for a rate hike today are pretty much null.

Speculative interest has long ago started priced in the end of monetary tightening, ignoring officials´ warnings against it. Furthermore, investors are pricing in multiple rate cuts for 2024, starting as soon as Q2. The SEP will then determine the direction of the US dollar, as the document may shed some light on what policymakers think could happen in the next couple of years.

Additionally, Chair Jerome Powell will offer a press conference in which he will explain the Federal Open Market Committee (FOMC) decision. Powell’s words will also be scrutinized for hints on future actions. The US Dollar will likely react to the market’s sentiment, falling if investors turn optimistic and opt for high-yielding assets.