Gold price analysis: Levels to watch out for ahead of the Fed interest rate decision

Gold price remains range-bound ahead of the Fed interest rate decision and FOMC policy statement later in the day. While investors expect the bank to hike rates by 25 basis points, there’s uncertainties over its cause of action in subsequent meetings. A hawkish Fed will lower the bulls’ chances of boosting the precious metal to the psychologically crucial zone of $2,000 an ounce.  


July’s two-day Fed meeting is to be concluded on Wednesday; culminating into an interest rate decision and FOMC policy statement. Indeed, this economic event is the focus in financial markets, an aspect that explains gold price’s range-bound trading in recent sessions.

Investors expect the bank to increase interest rates by 25 basis points. Even so, there are uncertainties over whether it will approve additional hikes in coming months.  This confusion is what has stalled gold price rebound after its strong performance in the first half of July.

Weak economic data and signs that inflation has peaked heightened bets of a rather dovish Fed in the ensuing meetings. The bank has previously hinted at two more rate hikes by the end of the year. However, if July meeting marks the last increase for the year, the bulls may have an opportunity to boost the precious metal higher towards the psychological level of $2,000 per ounce.

Gold price technical analysis

Gold price extended the previous session’s gains in Wednesday’s trade. This even as it remains range-bound ahead of the Fed interest rate decision later in the day.

A look at its daily chart shows the 25 and 50-day EMAs converging around the crucial zone of 1,950. The formation of a golden cross, which will happen if the 25-day MA crosses the 50-day MA to the upside will signal the bulls’ potential to retest the psychologically crucial zone of 2,000.

Notably, the formation of the aforementioned pattern is largely tied to the Fed’s decision as its two-day meeting comes to an end on Wednesday. A rather hawkish Fed will increase the opportunity cost of holding the non-yielding bullion.

If that happens, gold price will likely drop below 1,950 with the bulls striving to defend the support at 1,932. On the flip side, a dovish stance by the US central bank will give the bulls an opportunity to break the resistance at 1,988 and edge higher towards its next target at 2,000. I hold a bias for the latter scenario.

gold price
gold price

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