XAU/USD Directional Bias Tied to Fed Monetary Policy Posture

gold price Outlook: Mildly bullish

• Gold prices fell this week, but the Fed could trigger a bullish reversal soon
• of FOMC The Fed is expected to raise rates by 75 basis points at its November meeting, but may take a less hawkish stance on future rate hikes.
• The US central bank’s tightening bias could set the tone for precious metals trading in the short term.

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Gold prices fell this week, but fell USD The rally in risky assets encouraged traders to avoid defensive positions, pushing US Treasury yields lower. While precious metals are on a downward trend, In the past few months, the Federal Reserve could soon ignite the flames of recovery.

The FOMC is expected to raise rates by 75 basis points for the fourth time in a row at next week’s November meeting, but this adjustment has already been discounted, so what matters now for markets is what policymakers think about the future. or suggest

A pivot to a rate-cutting regime is unlikely anytime soon, but inflation continues to risethere are signs central banks may adopt a more hawkish stance, slowing the pace of rate hikes in an effort to engineer a soft landing.

Related: Growth vs Value Stocks – How Interest Rates Affect Valuations

It is true that activity remains resilient. Third Quarter Gross Domestic Product Report, but demand is clearly downshifting. That said, some Fed officials have become more cautious and believe the ferocious tightening cycle that started this year could do a lot of damage once fully operational in the real economy. trying to depend on

There’s probably a hawkish peak in the rearview mirror As economic headwinds mount into 2023, bond rates may begin to correct their declines, or at least stop rising as vigorously as they have throughout the year, with the U.S. dollar and, more importantly, could pave the way for a downward trend in real yields.This scenario is for gold and Silver.

In terms of technicals, bullion resumed its decline after failing to clear resistance in the $1,675 area, with support now at $1,615. If the bears can break out of this floor, a move towards $1570 is possible. Conversely, if a buyer comes back and triggers a bullish reversal, the first hurdle for him will be $1,675. If this barrier is decisively removed, a buyer could attack his $1,725.

gold price technical chart

Gold price chart created using TradingView

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— Written by Diego Colman, Market Strategist at DailyFX