Gold price outlook: Fed pause to hawkish policy keeps gold in check
Fed hawkish pause limits gold upside potential
Gold prices have shown resilience trading within a narrow range with signs of potential upward movement despite Federal Reserve's hawkish stance and fluctuating market sentiments.
The precious metal, known for its safe-haven status, is currently navigating through economic signals and policy statements that could dictate its next move.
This week, gold has been oscillating, with the price action confined to the range between a high of 2770 and a low of 2730 since Monday. On Thursday, January 30th, gold hit a three-day high during the Asian session, trading near 2770 in the European session. This movement, although within a tight band, brings gold less than 1% from its all-time high of 2790, suggesting the metal could soon challenge these peaks again.
Gold price dynamics (December 2024-January 2025). Source: TradingView.
The hawkish pause from the Federal Reserve, announced on Wednesday, has bolstered the US Dollar, traditionally a counterweight to gold's performance. Fed Chair Jerome Powell's remarks, emphasizing a wait-and-see approach regarding monetary policy adjustments, have kept gold's gains in check. Notably, Powell confirmed no direct communication from President Donald Trump, steering clear of any political involvement in monetary policy decisions. He highlighted that the current policy stance is "less restrictive" than before but did not signal immediate changes in interest rates, focusing instead on observing fiscal and trade policy developments from the new administration.
Gold relative strength index suggests potential bullish breakout
Despite these pressures, technical indicators like the Relative Strength Index (RSI) remain in bullish territory without being overbought, hinting at the potential for further price gains. This bullish signal, combined with the recent price action, suggests that gold might not be far from setting new highs if market conditions align favorably.
As we move forward, investors will be watching closely how gold reacts to these economic indicators and policy directions. With the Fed in a holding pattern and gold's price action showing signs of a breakout at the climax of January, the precious metal is likely to surpass its record high in the coming month.
Gold recovered 1% from the 50-day EMA support on the 4-hour chart. The decline earlier in the week was triggered by a bearish daily engulfing pattern, which briefly pressured prices lower.
