For the first time in seven days, gold price finished higher against the US dollar after the Fed announced more easing measures. XAUUSD closed at $1,528.13 after opening at $1,509.94.
Yesterday, Fed Reserve Chairman Jerome Powell announced the launch of the central bank’s Primary Dealer Credit Facility (PDCF). With it, “primary dealers to support smooth market functioning and facilitate the availability of credit to businesses and households.” It will provide loans with terms of up to 90 days with interest rates equal to the credit rate in the NY Fed.
Along with this, the central bank also launched the Commercial Paper Funding Facility. This would act as a liquidity backstop for firms who need to raise funds for short-term expenses through corporate bonds.
This move follows after the Federal Reserve cut rates to 0.00%. Consequently, the flood of liquidity in the markets may have raised skepticism about the viability of fiat currencies and drew bids to gold.
On the daily time frame, we can see that gold price is trading between resistance at the 100 SMA and support at the 200 SMA. This price action could suggest that the market is divided on which direction the precious metal will head to next.
A closer look at the hourly time frame suggests that buyers may soon push gold price higher. For one, XAUUSD has already broken resistance at the falling trend line (from connecting the highs of March 11, March 12, and March 13. Secondly, price action on XAUUSD during the latter part of the New York session to this morning shows it being in a consolidation. Because this follows after a strong rally on gold price, a bullish pennant chart pattern has been completed. A break above yesterday’s high at $1,553.87 could mean that XAUUSD may soon trade higher to its March 13 highs at $1,595.40.
On the other hand, a bearish close below the range at $1,519.89 would invalidate the bullish pennant. It could hint that XAUUSD has room to trade lower. Near-term support for the precious metal could be at $1,492.85 where it may test the broken trend line for support.More content