Daily Market Recap – GOLD Attempts a bullish turnaround before the FOMC conclusion

Gold prices have been recovering since the beginning of the week thanks to the decline in the US dollar. The price of gold has gained a little more than 1% since Monday morning after hitting a one-month low below $1,750 due to the rising greenback.

Gold prices are gaining momentum ahead of the highly anticipated conclusion of the FOMC meeting tomorrow night. This meeting is particularly important for investors as they await not only the Fed's tapering timetable, but also the new FOMC rate projections.

The new FOMC projections will be key for the markets. With inflation rising above their expectations, some FOMC members may raise their outlook for Fed rates in the coming years, which could cause investors to fear that the Fed's monetary policy is too tight.

In this scenario, risk aversion would not benefit gold. On the contrary, an overly tight monetary policy would mean that bond yields would rise, which would also put pressure on gold (in addition to stocks and bonds). In fact, gold would strengthen in the event of a dovish tone from the Fed.

From a technical perspective, gold is poised to form an “inverted head and shoulders” bullish reversal pattern on Tuesday. Gold will need to firmly break above its short-term resistance at $1,767 to validate this technical pattern and adopt a bullish outlook.

The “inverted head and shoulders” reversal pattern would pave the way for a bullish reversal in gold to around $1800 in the near term.

Note that gold is also attempting to break out of its hourly Bollinger Bands at the top, which would be an additional bullish signal on an hourly close.

 (Chart Source: Tradingview 21.09.2021)

The bullish outlook would be invalidated in the event of a pullback below the “right shoulder” support at around $1760.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.