Gold price forecast: Expect range-bound trading ahead of the Fed’s meeting

Federal Reserve

Gold price will likely remain range-bound as investors await cues from the Fed December meeting scheduled for the coming week. With the persistently high inflation, there are jitters that the bank may remain hawkish. If that happens, $1,700 will be a level worth watching. In the meantime, I expect the precious metal to remain within the horizontal channel of between $1,750 and $1,820.

gold price
gold price


Uncertainty in financial markets

Slightly over a week ago, the Fed Chair , Jerome Powell, stated that the US central bank may approve slower interest rate hikes from as early as December. However, he was fast to note that the Fed officials need to continue working hard to deal with the persistently high inflation.

Notably, the Fed’s dovishness boosted gold price to a five-month high of $1,810.15 at the start of the week. However, jitters of a hawkish Fed are back. In fact, the resultant uncertainty in the financial markets is largely behind the subtle movements recorded by the precious metal in recent sessions. I forecast that this trend will continue in the coming days as traders await clarification from the Fed meeting scheduled for 13th – 14th December.

What’s likely to happen?

As has been the case in recent months, the Fed’s position has been a major driver for gold price. In fact, since March when the bank started its aggressive monetary policy tightening, the precious metal has dropped from a one-and-a-half year high at $2,069.81 in March to an over two -year low at $1,617.12 in mid-September. A hawkish tone during the Fed’s December meeting will likely have the bulls defending the crucial level of $1,700.

If CNBC’s Jim Cramer’s recent remarks are anything to go by, there is a probability that the bank will continue with the interest rate hikes for a while longer. On Monday, the analyst highlighted some reasons why the Fed may continue with its policy tightening in coming months. This includes the disparity between the number of job seekers and job openings.

Granted, the latest JOLTs figures showed that in October, there were 10.3 million available jobs compared to 10.7 million in the previous month. Even so, the US labor market remains significantly tight with wage inflation remaining a major concern for the Fed.  

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