Will Fed Chairman Powell Save XAU/USD?

• Gold prices are attempting to rebound slightly from a three-week low of $2,644 early Thursday morning.
• The US dollar is strengthening Trump’s rally over the Republican nominee’s presidency.
• The daily technical picture for gold prices suggests the tide has turned in favor of sellers.

Gold prices jumped from a three-week low of $2,644 in Asian trading on Thursday as the dust settled from a massive sell-off triggered by Republican candidate Donald Trump’s victory in the US presidential race.

Gold price remains defensive pending Fed decision

The US dollar (USD) entered a bullish consolidation phase after rising to its highest level in four months against its major rivals, benefiting from Trump’s resumption of trading. Trump’s policies on immigration, tax cuts and tariffs are expected to put upward pressure on inflation, Wall Street stocks, US Treasury yields and the US dollar.

These Trump administration expectations and their likely implications for the economy have doomed the price of non-yielding gold, pushing it about $100 off static resistance at $2,750.

Attention now turns to statements from the US Federal Reserve (FRS), due later this Thursday. Markets are fully priced in the Fed’s 25 basis points (bps) rate cut this week, but investors will be scrutinizing any hint of further central bank rate action.

Donald Trump’s return to the White House could prompt the Fed to slow its easy cycle as its expansionary fiscal policy is seen as highly inflationary.

Fed Chairman Jerome Powell is expected to reaffirm the independence of the U.S. central bank and that it will act as the economy and inflation progress. Powell will likely acknowledge the recent lull in the labor market and progress in fighting inflation, reiterating that the Fed will remain “data-driven” in determining its next policy step.

Technical analysis of gold prices: daily chart

As can be seen on the daily chart, the price of gold has cleared all major Fibonacci (FIB) support levels amid the sell-off caused by Trump’s trading on Wednesday.

The 14-day Relative Strength Index (RSI) also broke above its midline and dived into bearish territory, currently hovering around 43.

The leading indicator suggests further declines remain in the near future. However, a temporary pullback after the previous decline cannot be ruled out.

A dovish signal from the Fed could save gold buyers as they defend critical support at $2,641, which is the confluence of the 50-day simple moving average (SMA) and the 78.6% Fib level of October’s latest record rally. 10 from a low of $2,604 to a new all-time high of $2,790.

Gold buyers will be looking for acceptance above the 61.8% Fibonacci support-turned-resistance level at $2,673. Further up, a strong upper barrier around $2700 will be tested, where the Fibonacci 50% of the same rise level coincides.

If the Fed signals a slowdown in the pace of monetary easing in the coming months, the price of gold could see a sustained break below the aforementioned healthy support at $2,641.

The new downtrend will reverse to the October 10 low of $2,604, below which the psychological level of $2,550 will call bullish commitments into question.