Gold Price Forecast: XAU/USD skyrockets as the Fed signals end of a tightening cycle

• Gold’s rallied more than 1.30% as traders brace for Powell’s press conference.
• Federal Reserve officials voted unanimously and expect at least three rate cuts for 2024.
• XAU/USD hits a three-day high, eyeing more gains above $2000.

Gold price rallied sharply as the Federal Reserve held rates, showing they finished their tightening cycle. As projections for the federal funds rate eased, reassuring market participants it would ease monetary policy, but not as they had priced in. Despite keeping the door open for additional tightening, traders perceived the decision as a dovish hold. At the time of writing, XAU/USD trades volatile within the $1950-$2000 range ahead of Powell’s press conference.

Summary of the Fed’s monetary policy statement

In the monetary policy statement, Fed officials stated the held monetary policy unchanged at the 5.25% - 5.50% range for the third consecutive meeting while acknowledging that growth has eased and the labor market has moderated. Despite that, Fed officials added that inflation has cooled but remains elevated.

The US central banks stated they would remain data-dependent to set monetary policy in the upcoming year and continue to reduce their balance sheet as previously described. In contrast, they said their commitment to bring inflation towards its 2% goal.

Aside from this, the highlight was the Summary of Economic Projections (SEP) that confirmed the Fed had finished its tightening cycle, as most officials estimate the federal funds rate (FFR) to be at 5.4% for the remainder of the year. For 2024, the US central bank has telegraphed it would ease monetary policy by 72 basis points, from the FFR effective rate of 5.33% to 4.61%.

In other projections, growth is foreseen to rise to 2.6% from September 2.1%, while headline inflation is expected to dip below 3% and core to ease towards 3.2%, with both readings projected to reduce compared to September.

Gold’s (XAU/USD) market reaction to the decision

Gold hourly chart witnessed the yellow metal exploding to the upside, breaking the $2000 mark, though it remains trading volatile as traders brace for Fed Chair Jerome Powell's press conference. Upside risks are seen at the October 27 high of around $2009.42, followed by the December 8 high at $2034. Downside risks emerge at $1972.60.

XAU/USD Technical Levels