Gold price outlook with focus on Fed Chair’s speech

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Aug 27, 2021
  • Gold price is hovering around $1,800 as investors await cues from Jerome Powell's speech.
  • Some policymakers have maintained a hawkish tone as they expect rate hikes in 2022.
  • Some investors still expect Powell to hold a cautious stance, which would boost gold price.

Gold price is hovering below the crucial resistance level of $1,800 after dropping below it earlier in the week. Investors are fixated on the Fed Chair’s speech scheduled for later in the day during the ongoing Jackson Hole symposium.

gold price
gold price

Tapering expectations

In the previous week, FOMC meeting minutes highlighted the Fed’s intentions to begin tapering asset purchases before the end of the year. The committee members stipulated that the move would not be a precursor for rate hikes.

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However, some policymakers seem to hold a different opinion. During an interview with CNBC, Dallas Fed President, Robert Kaplan maintained his stand that the Fed should begin tapering its asset purchases in October. Besides, he expects the US central bank to hike rate in the coming year. Kansas City Fed President and St. Louis Fed President also hold a hawkish sentiment.

On the other hand, some investors are of the opinion that the Fed Chair will maintain a rather cautious tone as has been the case in the recent past. If that happens, risk-sensitive assets will likely record some gains. Besides, a somewhat dovish stance may exert pressure on the US dollar while boosting gold price.

Gold price technical outlook

XAU/USD is headed to the crucial resistance level of 1,800 after dropping below it on Wednesday. In the previous session, the precious metal hit an intraday low of 1,779.99 before bouncing back. At the time of writing, it was up by 0.4% at 1,799.13.

Since declining from the key resistance level of 1,900 in mid-June, 1,800 has been a benchmark in the gold price recovery for about two months. On a three-hour chart, it is trading slightly above the 25 and 50-day exponential moving averages. It is also above the long-term 200-day EMA.

In the immediate term, gold price will likely hover around the psychological level of 1,800 as investors await further cues from Jerome Powell’s speech. The subsequent range-bound trading will place the horizontal channel’s borders at 1,810.41 and along the 25-day EMA at 1,792.29.  

Hawkish remarks from the Fed Chair may push the precious metal lower to below the 200-day EMA at the previous support level of 1,777.00 before rebounding to along the 25-day EMA. On the flip side, a breakout past the 1,800 resistance level will likely place it at 1,825.13.  

gold price
gold price

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