Gold price prediction ahead of January’s Fed meeting

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 Jan 25, 2022
  • Gold price has been holding steady above the support zone at $1,800 for about two weeks.
  • The focus is on the two-day Fed meeting set to begin on Tuesday.
  • Analysts expect at least four interest rate hikes over the course of the year.

Gold price is trading within a horizontal channel for the fifth consecutive session at its current 1,843.44. The focus is on the two-day Fed meeting that is set to begin on Tuesday.

Fed meeting

Gold price has eased on its previous gains in early Tuesday trading as a reaction to the rebound in US bond yields. On Monday, the benchmark 10-year Treasury yields dropped to 1.70 before bouncing back to the current 1.77%. Higher yields increase the opportunity cost of holding the non-yielding bullion.

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At the same time, it has found support in the decline on the value of the US dollar ahead of two-day Fed meeting. The dollar index pulled back from the two-week high of  $96.13 on Monday to $95.86.

January’s Fed  meeting is scheduled to start on Tuesday with the interest rate decision expected on Wednesday. Investors will be looking for clues on the number of rate hikes expected in the current year and when they will begin.

According to Goldman Sachs, the baseline forecast is for four hikes. The investment bank expects the Fed to increase rates in March, June, September, and December. However, with the heightened inflationary pressures, it sees a probability of more hikes over the course of the year.  

The last time that the US central bank increased interest rates was in December 2018. If the Fed was to hike rates before March, Gold price would likely trade below $1,800 before inflation concerns pushes it back up.  

Gold price prediction

The precious metal has been trading within a horizontal channel since mid last week. The channel’s lower and upper borders are at 1,828.40 and 1,848.18 respectively. Notably, it has been holding steady above the psychologically crucial zone of 1,800 for two weeks now .

The four-hour chart highlights a bullish outlook as gold price trades above the 25 and 50-day exponential moving averages. It will likely continue to face resistance at the range’s upper border as investors avoid placing huge bets ahead of the Fed interest rate decision scheduled for Wednesday.

Amid the heightened inflationary pressures, I expect gold price to remain above the support zone of 1,800. Hints of a March rate hike may exert some pressure on the bullion; probably pushing it lower to the range’s lower border at 1,828.40.  

A further decline will have the bears eyeing 1,820.20. On the flip side, the bulls’ next target past the current resistance level will be at mid-November’s high of 1,858.40.

gold price
gold price
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