Gold Prices Cross Resistance Amid A Dovish Fed

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Gold Prices Cross Resistance Amid A Dovish Fed

Gold Prices Cross $2,000 Resistance Amid A Dovish Fed

Gold prices continued the bullish advance during Friday's session after the Federal Reserve meeting, leading to a dovish outcome.

The comments from the Fed officials have made it clear that the central bank policy has shifted from hawkish to dovish. As a result, the US dollar and the bond yields are experiencing steep losses as they adjust to a new reality.

This week, the Yellow Metal (XAU/USD) moved from weekly lows to beyond the $2K threshold. This came after the Fed's announcement that they were done with the rate hikes. The Fed officials also added that big interest rate cuts will be announced in 2024.

Three Rate Cuts From Fed In 2024

After the comments from the Fed, Wall Street is now forecasting 3 interest rate cuts in the year 2024. As for the timing of the first rate cut, it could happen somewhere in March 2024.

The Fed comments sent the US Dollar to around 4-month lows along with the bond-yields as well, which are now trading under 4%.

This fundamental backdrop has proven to be positive for Gold (XAU/USD) as funds have been moving away toward other assets. According to experts, an environment of low-interest rates is beneficial for assets like gold, and that's exactly what we have seen in the markets recently.

That's why we can safely say that the recent demand for Gold is driven by its safe haven status and the current market sentiment.

Spot Gold (XAU/USD) can be seen trading near $2,036 per ounce with a bullish outlook. Similarly, the Gold Futures contract for February is trading near $2,050 with an increase of 0.3% for the day. Both of these Gold instruments are up by 1.6% (Spot Gold) and 2% (Gold Futures) for the week.

The bottom line is that the markets now believe in several rate cuts from next year, with the first one coming in as early as March. At the March meeting, the markets are now pricing in a 25 bps rate cut.

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