Gold (XAU/USD) Analysis

The Fed gave gold the green light after confirming rate cut viewGold soars to new all-time highThe analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

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The Fed Gave Gold the Green Light after Reaffirming Rate Cut View

The Federal Reserve announced their latest monetary policy statement yesterday alongside the summary of economic projections. The immediate takeaways from the announcement include the Fed sticking with the original, three interest rate cuts this year alongside upward revisions to both inflation and growth.

Fed Summary of Economic Projections, March 2024

Source: Federal Reserve, Summary of Economic Projections March 2024

Questions have been raised over just how tight economic conditions are in the US given the resilience of both the jobs market and economic growth. Naturally this has led to much speculation over the ‘neutral rate’ which is the Fed funds rate that is neither accommodative nor restrictive and was previously thought to be 2.5%. The March forecasts include upward revisions to the Fed funds rate for the entire forecast horizon and more notably saw a slight rise in the long-run rate rate from 2.5% to 2.6% - perhaps a nod to a higher theoretical neutral rate.

Ahead of the announcement markets had priced in the potential for the Fed to ease up on rate cut expectations in light of robust economic data and hotter-than-expected inflation prints that have emerged in some way or another since December 2023.

Therefore, the confirmation of the Fed’s December rate projections resulted in a dovish repricing in the dollar and shorter dated yields like the 2-year Treasury yield, providing gold with the ammunition to forge a new all-time high on Thursday.

Gold 5-Minute Chart

Source: TradingView, prepared by Richard Snow

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Gold Soars to New All-Time High

Gold continued its bullish run after Wednesday’s FOMC meeting provided the catalyst. Bullish continuation was something highlighted in the previous gold update, as long as prices consolidated above the prior all-time high of 2146.80 – which they had.

The new high of around 2222 has put down a new marker for gold bulls, backed by higher central bank purchases, most notably from China in recent times. The precious metal may be due for a temporary pullback after the large move and could soon find resistance it the dollar recovers and continues its recent uptrend. Support remains back at 2146.

Daily Gold (XAU/USD) Chart

Source: TradingView, prepared by Richard Snow

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