Gold Price Threatening to Drop Below 1900 on FOMC Chief’s Remarks

Gold price is lower on the day after some belated USD strength following the announcement of a new inflation targeting strategy by the FOMC Chair, Jerome Powell. In his prepared statement which was delivered at a virtual session of the annual Jackson Hole Symposium, FOMC Chairman Jerome Powell announced a new inflation targeting strategy which will see the Fed pursue an average inflation target of 2% as opposed to the previous fixed target. This new flexible regime has been adopted to take cognisance of evolving market and economic conditions since the last review was conducted in 2012. 

The initial market reaction saw the greenback on offer along with US bond yields, but the sentiment has largely changed after the FOMC Chair clarified that the Fed would only allow a “moderate overshoot” of inflation in response to a question posed by Susan Collins, the Provost of the University of Michigan who moderated the session.

Technical Outlook for XAUUSD

Price action on the XAUUSD daily chart shows that the daily candle respected the boundaries of the symmetrical triangle that was identified yesterday. The 1918,68 support continues to stand firm, supported by the triangle’s lower border. But gold price is perilously close to breaking 1900 to the downside, if current sentiment plays out today and tomorrow. 

3% penetration by the weekly candle below this price level confirms the breakdown, opening the opportunity for gold price to target the 1898.48 support initially (61.8% Fibonacci retracement level) with the 78.6% Fibonacci level and 12 August low at 1850.29 coming in close as the next target to the downside. 1869.55 and 1821.55 also remain distant support targets. 

On the flip side, the pattern can also be viewed as a continuation pattern, which leaves a considerable price objective for the measured move beyond 2075.14 (record high). This measured move has to overcome the 2008.04, 2050.0 and 2075.14 resistance areas to be actualized. 

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XAUUSD Daily Chart

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