Gold prices (XAU/USD) remained near record highs on Wednesday, holding steady as investors awaited the Federal Reserve’s policy update. The precious metal showed resilience despite a slight pause in momentum, with the market anticipating the Fed’s announcement later in the day.
Fed’s Policy Decision in Focus
The Federal Reserve is expected to leave interest rates unchanged at the current range of 4.25% to 4.50%. Market participants are particularly focused on the Fed’s accompanying policy statement, economic projections, and the much-anticipated dot plot, which will provide insights into the central bank’s future rate-cut path. Fed Chair Jerome Powell’s comments at the post-meeting press conference are also expected to provide critical guidance on the Fed’s monetary policy stance moving forward. These elements are likely to impact the U.S. Dollar (USD) and provide direction for gold prices.
USD Gains Amid Repositioning, Gold Price Supported by Safe-Haven Demand
Ahead of the key central bank decision, the U.S. Dollar gained some traction, breaking a three-day losing streak and recovering from a five-month low. This slight rebound was attributed to repositioning by traders, although the near-term bias for gold remains bullish. Market expectations that the Fed will lower interest rates later in the year, fueled by concerns over a tariff-driven economic slowdown, continue to support gold’s safe-haven demand.
In addition to the economic risks posed by U.S. trade policies, ongoing geopolitical tensions, particularly in the Middle East, are expected to keep gold prices elevated. Israeli airstrikes on Hamas targets in Gaza, which have resulted in over 400 casualties, are further increasing demand for the safe-haven asset.
Gold Price Rally Supported by Tariff Concerns
U.S. President Donald Trump’s aggressive tariff policies, including reciprocal tariffs set to take effect on April 2, continue to stoke fears of a global trade war. These concerns, coupled with the uncertainty surrounding the Fed’s monetary policy response, have kept traders bullish on gold.
Market expectations suggest that the Fed could cut rates by 25 basis points during its upcoming meetings in June, July, and October, adding further support to the yellow metal’s appeal.
Technical Outlook: Gold’s Path Remains Upward
The technical outlook for gold remains positive, with the price staying above the key $3,000 level. The daily Relative Strength Index (RSI) above 70 indicates that the market may be in slightly overbought territory, suggesting that consolidation or a modest pullback could be on the horizon. However, any dip in prices is likely to be seen as a buying opportunity.
Key support levels are seen around $3,005-$3,000, with additional support at the $2,980-$2,978 region. If these levels are breached, gold could face further technical selling, potentially dragging prices to the $2,956 zone, with further declines towards $2,930 or $2,900 possible in the near term.
Conclusion
Despite a brief pause in the rally, gold prices remain on a strong upward trajectory as geopolitical tensions and economic risks continue to drive demand for the safe-haven asset. With the Federal Reserve’s decision and future rate cuts likely to support the bullish bias, gold prices are expected to remain resilient, with any corrective pullbacks seen as potential buying opportunities. Traders will be closely monitoring the Fed’s actions and comments for further direction.