Gold Price Prediction – Prices Whipsaw Following Fed Decision

Gold prices moved lower in the wake of the Fed decision, as the dollar edged higher. The Fed was attempting to thread the needle and raised rates by 25-basis points while lower the average number of hikes that will likely occur next year from 3 to 2. Growth was reduced slightly, unemployment was unchanged and inflation was slower by 0.1%.  Risker asset such as stocks gyrated widely.

Technical Analysis

Gold prices moved lower in the wake of the Federal Reserve decision hitting a 6-month high at 1,257 ahead of the statement. Prices moved lower mid-day in the North American Trading session hovering near 1,245. Support is seen near the 20-day moving average at 1,234, and then the 50-day moving average at 1,227. Momentum is neutral to negative. The RSI turned lower reflecting decelerating positive momentum. The MACD (moving average convergence divergence) index is poised to generate a crossover sell signal. The MACD histogram is printing in the black with a declining trajectory which points to consolidation.

The Fed Raised Rates

As widely expected, the FOMC increased the target Fed funds rate to a higher range up to 2.25% to 2.5%. The move marked the fourth increase this year and the ninth since it began normalizing rates in December 2015. It came despite President Donald Trump’s tweets against rate hikes. The markets believed that the Fed was very likely to increase the Fed Funds Rate. The commentary said:

“The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term.”

The Fed decreased growth slightly, and also decreased the likely rate on inflation but also believes that jobs will continue to grow pushing the unemployment rate lower. They did acknowledge high level of volatility which could continue to weigh on markets.