Gold Price Outlook Ahead of Commentary from FOMC Members

It is now two weeks to the Fed’s interest rate decision, and gold price action shows a day of choppy price movements as bargain hunters battle with sellers on a three-day winning streak. Gold price on the XAU/USD chart is now 0.1% off the pace, having lost the earlier gains of the session. This follows two previous days of decline, in which gold price lost 0.15% and 0.44%, respectively. 

In the last month, gold prices have slid from the 10 August high at 1807 to the 7 September low of 1691. The principal driver of this selloff in gold has been the various commentary from Federal Reserve policymakers that continue to push for more aggressive rate hold action to control US inflation, which presently stands at 8.5%.

This is 650 basis points higher than the Fed’s soft target of 2%. The latest jobs report showed that the US labour market has begun to contract, which could be the early signs of a recession triggered by the aggressive monetary tightening the Fed has embarked on. This leaves a fascinating scenario for gold prices heading into next week as rate hike bets start to take shape. 

This week, the fundamental drivers will come from Thursday’s comments by Fed Chair Jerome Powell at a virtual event and two separate speeches by FOMC members Esther George and Christopher Waller. These events will produce Q&A sessions which could lead to unscripted comments that indicate the Fed’s potential direction on 21 September. 

Gold Price Prediction

The bulls repelled the violation of the 1696 support, preserving the integrity of that support level. The bulls need follow-up action by breaking the 1716 resistance to restore the recovery move, targeting 1739 (28 August high). A continued advance brings 1753 (2 August low and 23 August high) into the picture, leaving 1772 (3/18 August highs) as the next northbound target in line. 

However, an eventual breakdown of the 1696 support puts the bears in a position to aim for 1679 (21 July low). 1670 (1 May and 5 June 2020 lows) comes up next as a harvest point for the bears if there is further price deterioration. The 9 April 2020 low at 1643 remains another viable target to the south.  

XAU/USD: 4-hour Chart