GOLD Analysis – September 23, 2021

Dovish FOMC Underpins XAU/USD

Gold prices ended the day at $1767.80, with a high of $1788.25 and a low of $1765.25.After rising for two consecutive sessions, gold dropped on Wednesday amid the strength of the U.S. dollar. On Wednesday, the greenback was strong across the board as it reached 93.51, its highest since August 20. The U.S. dollar pushed down the price of gold after the Federal Reserve signaled it would ease its monthly bond purchases by next year and increase interest rates sooner than expected.

The appeal for the yellow metal was subdued after the U.S. Federal Reserve mentioned in its latest policy meeting on Wednesday that tapering economic support will begin this year and interest rates will potentially rise next year in response to inflation. As a result, the U.S. Dollar Index reached its one-month highest level and decreased the appeal of gold. The precious metal is often considered a hedge against higher inflation. However, it tends to lose its value if the Fed increases its interest rates or reduces its support for the economy.

Meanwhile, on Wednesday, Fed Chair Jerome Powell said that the Fed was pushing ahead with its study into implementing its digital currency. The Fed has also revealed its plans to release a paper on the issue shortly. According to Powell, there has been no decision made regarding the matter yet, and the Fed was not under any pressure to rush into a decision like this without proper research of its own.

Powell also said that the Federal Reserve could wrap up the tapering of its bond purchases by the middle of the following year. The central bank has been buying $120 billion a month of Treasuries and mortgage-backed securities to support the economy’s recovery from the coronavirus pandemic. These comments led the U.S. Dollar Index to its one-month highest level and weighed heavily on the precious metal, turning its momentum red for the day. At 19:00 GMT, the existing home sales in August remained flat with expectations of 5.87M. It had a null impact on the prices of the U.S. dollar and gold.

GOLD Intraday Technical Level

Support Resistance

1759.29 1782.29

1750.77 1796.77

1736.29 1805.29

Pivot Point: 1773.77

GOLD - Technical Outlook

The precious metals gold slipped below 1,773 pivot point support level and heading towards the next support level of 1,759. The breakout below the 1,759 level exposes gold prices towards a further support level of 1,750 level. At the same time, a bullish breakout of 1,773 levels exposes the metal towards 1,781 levels.

On the 4-hour timeframe, gold has completed 61.8% Fibonacci retracement at 1,781 level. Thus, the closing below this level has triggered a sell-off in gold. The RSI and Stochastic indicators are holding in a sell zone, while the 50 SMA provides resistance at a 1,773 level. Therefore, the bearish bias dominates below the 1,773 level and vice versa. All the best!