Gold price analysis: can XAU/USD revisit $2,000 following June’s crucial FOMC meeting?
Gold (XAU/USD) prices have managed to recover since March when the yellow metal tumbled well below the $1,700 mark. However, despite higher inflation figures, the US dollar continues to dominate the markets and pressuring gold, which failed to breach resistance at $1,900.
With the Federal Reserve meeting and interest rate decision taking place today, Wednesday at 20:00 (GMT +2), traders anticipate choppy price action across the currency and commodity markets.
The Fed has been trying to convince investors that inflation is transitory and the high inflation figures are par for the course during these historical times i.e., a roaring pandemic and the fallout across the global financial markets.
Today we are taking a look at the recent performance of the gold market and what’s the outlook for the world’s favourite metal.
Gold’s recent performance
While gold prices have started tumbling since August 2020, we have witnessed a recovery with XAU/USD marching upwards since March. In general, the medium-term picture shows an uptrend and reclaiming the $2,000 top is not out of the realm of possibility.
If we take a look at gold’s monthly performance, we can see that prices have topped out at $1,916 on the 1st of June while most recently, resistance seems to be set at the strong psychological level of $1,900 per ounce.
The support zone has been formed near May’s lows at $1,850 as the market bounced back from that level again on the 14th of June. Currently, gold is changing hands at $1,859, however, the Federal Reserve meeting looms ahead and the market’s future direction will be decided soon after the initial reaction to the Fed’s statements.
Federal Reserve meeting: what to expect
While the consensus is that the Feral Reserve will not make any changes to its monetary policy, but it is more than likely to announce that discussions will kick off regarding a tapering to its bond-buying programs, which currently stand at $120 billion dollars a month.
These massive asset purchases were meant to support the economy until unemployment came back on track, however, heightened inflation data – regardless of how transient they may be – will need to be addressed at some point.
An increasingly permanent inflation is a net positive for gold prices, which tend to thrive when the dollar depreciates.
In the case that Jerome Powell, the head of the Fed rejects tapering discussions, we are likely to see a sell-off for the US dollar, which in turn will boost gold prices. However, if talk of tapering resumes, gold prices are meant to stumble once again.
How to profit from movements in gold prices
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As soon as your account is funded and active, you will be able to buy or sell gold (XAU/USD) contracts in order to start generating returns regardless if the market is trending upwards or downwards. This is possible because CFDs (Contracts for Difference) allow traders to open a sell position in order to profit from falling prices as well.
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Moreover, each client is assigned with personal Trading Specialist who can help them find a suitable trading strategy that aligns with their investment goals and risk tolerance.
Discover more opportunities with CMTrading
CMTrading offers more than 150 tradable assets including the most popular commodities available in the markets. CM Trading clients get access to the global financial markets, exceptional trading conditions and robust safety and security under the auspices of the Financial Sector Conduct Authority (FSCA) in South Africa.
Being a retail brokerage that specializes in CFDs (Contracts for Difference), CMTrading provides clients with unique advantages such as 100:1 leverage on XAU/USD, which allows traders with smaller accounts to gain exposure to much larger positions. This translates to substantially higher profit potential, however, it should be noted that leverage also increases your exposure to downside risk.
While leverage typically adds a certain degree of risk to any investment, CMTrading also offers negative balance protection, thereby guaranteeing that potential losses will never exceed your invested capital.
If you are interested in learning more about how you can take advantage of price movements in the best-performing commodities or aim to generate returns from fluctuations in the exchange rate of currency pairs, you will find that CMTrading’s unique offering of innovative services and diverse account types are suitable for both beginner and experienced traders.
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