Gold price found solid support once again near $1792 levels and initiated a strong uptrend on Thursday, reaching as high as $1810 before settling the day around $1807. Gold bulls got that much-needed boost from the Fed monetary policy announcement, which disappointed the hawks big time. The Fed maintained its monetary policy settings in its July meeting, in line with expectations. However, Fed Chair Jerome Powell said that the central bank is in no rush to begin rolling back the bond-buying, as the post-pandemic economic recovery is not there yet. The Fed’s dovish take smashed the Treasury yields and dragged the US dollar lower alongside, benefiting gold price. The precious metal also cheered the optimism around the US infrastructure stimulus deal, with the Wall Street Journal (WSJ) reporting that “negotiators of roughly $1 trillion package are confident they have locked down enough Republican and Democratic support to advance bill later Wednesday.” Meanwhile, the ongoing surge in coronavirus cases globally also continues to bode well for the traditional safe-haven gold.
In the aftermath of the Fed decision, gold price is extending its recent run higher, looking to recapture the critical 200-Daily Moving Average (DMA) at $1821. The market mood has improved amid a rebound in the Chinese stocks, as the People’s Bank of China (PBOC) came to the rescue and calmed the nerves after the recent crash. The recovery in the risk sentiment exerts additional downside pressure on the US dollar, which bears the brunt of the Fed’s dovishness. The weakness in the US rates combined with looming covid concerns also keeps the gold bulls afloat.
As observed on the daily chart, gold price is approaching the horizontal 200-DMA barrier, as the fundamental factors appear supportive of a move higher.
Acceptance above that level could call for a test of the mildly bearish 50-DMA at $1830.
Meanwhile, the 21-DMA at $1805 guards the immediate downside, below which the 100-DMA at $1800 could be back in play.
Further south, the range lows of $1792 could offer some support to gold bulls.
However, with the 14-day Relative Strength Index (RSI) holding firmer above the midline, the path of least resistance appears to the upside in the near term.
