USD Tumble Boosts Gold

Gold prices have broken out to fresh all-time highs today on the back of a weaker USD post-FOMC. The Fed yesterday held monetary policy unchanged, as expected. However, its accompanying statement and outlook were a little more on the dovish side than many were expecting. The main takeaway from the event was that the Fed is still forecasting three rate-cuts to take place this year. On the back of the recent uptick in inflation and with the jobs market still strong there had been some speculation that the Fed might scale back its easing projections. However, with these kept in place, USD was heavily sold on the back of the meeting.

Fed Downplays Inflation Spike

Along with the dot-plot forecasts retaining their median projection for 3 cuts this year, Powell was also notably dovish at the press conference. The Fed chair downplayed the recent uptick in inflation which many policymakers saw as due to seasonal trends. We also heard Powell resolutely answering ‘no’ when asked if strong jobs data would prevent the Fed cutting rates.

Bullish Gold View

In all, the meeting was much more on the dovish side than most were expecting. While there were some hawkish details such as growth and inflation forecasts being revised higher, the takeaway is that the Fed still intends to cut three times this year. Against this backdrop, gold prices look likely to continue higher near-term with USD vulnerable to fresh weakness on any soft data.

Technical Views

Gold

The rally in gold has seen the futures market breaking out above the 2149.72 level. While above this level, the focus is on a fresh push higher and a test of the bull channel highs. However, with bearish divergence in momentum studies, bulls should be wary of reversal risks with any move sub-2149.72 turning focus to 2069.41 and the bull channel lows next.