- Gold price consolidates below all-time highs of $3,038 on the Fed day.
- US Dollar attempts recovery as traders resort to repositioning.
- Gold price could pull back before resuming its record-setting rally.
Gold price is consolidating the recent upsurge to a record high of $3,038 in Wednesday’s Asian trading hours. Gold buyers take a breather as a sense of caution prevails, heading toward the all-important US Federal Reserve (fed) monetary policy announcements due later in the day.
Gold price braces for the Fed verdict-driven intense volatility
The Fed is widely expected to extend the pause to its interest-rate-cutting cycle in March but the Statement of Economic Projections (SEP), the so-called Dot Plot chart, and Chairman Jerome Powell’s speech will hold the key to gauging the scope and timing of the central bank’s next policy moves.
Any hints of a further extension of the pause by the Fed this year, in the face of US President Donald Trump’s protectionism and its inflationary impact, could trigger a sharp correction in the non-interest-bearing Gold price. The US Dollar (USD) is likely to see a fresh recovery rally following a potential hawkish Fed decision.
Markets have priced in at least two more rate cuts this year due to growing economic concerns induced by Trump’s tariffs. Gold price could also feel the heat if the Fed policymakers pencil in fewer rate cuts this year compared to the December projections.
However, if Fed Chair Powell expresses concerns over a likely recession or if the Fed officials stick to their rate cut forecast for 2025, it could be perceived as a dovish hold. In such a scenario, the USD and the US Treasury bond yields could come under intense selling pressure, lifting Gold price to fresh record highs.
In the meantime, Gold could see a minor pullback as traders cash in on profits after the record rally while bracing for the Fed event-led volatility. Any downside in the safe-haven Gold price will likely remain capped due to persisting geopolitical and trade tensions.
Reuters reported on Wednesday that “Israeli airstrikes pounded Gaza and killed more than 400 people on Tuesday.” Meanwhile, Ukrainian President Volodymyr Zelensky remained sceptical on Russia’s proposal to halt strikes on energy infrastructure in a limited ceasefire arrangement agreed between US President Trump and his Russian counterpart Vladimir Putin over the phone on Tuesday.
These tensions, combined with tariff uncertainty and the outcome of the Bank of Japan (BoJ) policy decision, will likely drive the broad market sentiment, impacting the value of the US Dollar and the Gold price action.
The BoJ is expected to keep the short-term interest rate steady at 0.50%, with hawkish hints likely on the cards by the central bank due to rising inflationary pressures, stubborn wages and the trade war impact.
Gold price technical analysis: Daily chart
Technically, nothing changes for the Gold price in the near term as the bullish bias remains intact, with the ascending triangle breakout in play.
The 14-day Relative Strength Index (RSI) is flat-lined just above the overbought region, near 72, at the time of writing. The leading indicator suggests that a brief pullback could be in the offing before the next leg up resumes.
Therefore, if the Gold price extends the retreat, the initial demand area near the $2,980 level will be put to the test.
The next downside caps are at the previous triangle resistance-turned-support at $2,956 and the 21-day Simple Moving Average (SMA) at $2,935.
The triangle support at $2,915 will prove to be a tough nut to crack for sellers.
On the flip side, Gold price could retest the record high of $3,038 if buyers regain control. Further up, the $3,050 mark will be on their radars.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.
Next release: Wed Mar 19, 2025 18:00
Frequency: Irregular
Consensus: 4.5%
Previous: 4.5%
Source: Federal Reserve
