Fundamental analysis of XAU/USD

The gold price showed signs of recovery as investors processed the US Federal Reserve's announcement. The Fed plans to raise interest rates by 25 basis points, which will result in a new range between 5.25% and 5.50%. Investors are hoping that the July rate hike will be the last one this year, prompting the Fed to extend the pause in rate hikes. Current trading dynamics indicate that some traders are taking advantage of the limited trading conditions. Many expect interest rates to continue to fall, but Fed officials could still hint at another rate hike later in the year, possibly in September or November. The increase in interest rates on gold, a non-yielding monetary asset, is quite remarkable. It increases the potential opportunity cost of owning precious metals. However, even with this factor, bullion may maintain a positive trajectory, especially as the Fed's rate hike cycle is likely coming to an end. pressure on gold prices. Traders are also keeping a close eye on the European Central Bank's policy guidance and looking forward to the release of the US second quarter GDP data on Thursday.

Gold prices seem to have already priced in the prospect of a dovish Fed stance, which traditionally supports gold and pushes its prices up. However, as this expectation is universal, profit taking is possible. The announcement of an extension of rate cuts until the end of the year is likely to push gold prices higher. Conversely, the Fed's hawkish stance, or lack thereof, is a signal that a rate cut leads to higher interest rates, which will depress gold prices.

To summarize, gold prices rose as traders cautiously anticipated the Federal Reserve's decision. While the pause in rate hikes is generally expected to be prolonged, the possibility of further rate hikes cannot be ignored. Gold's reaction to the Fed's announcement will be crucial. In the event of a dovish decision, prices could receive support, while a hawkish view could lead to a sell-off. Traders continue to closely monitor economic indicators and central bank recommendations to determine the direction of the gold market in the near future.

Amid recession fears As the global economy weakens, supported by confidence and a jump in the Fed rate hike announcement, pressure on the US Dollar Index (DXY) is intensifying. Fed Chairman Jerome Powell does not appear to be too tough on persistent inflation. This, as well as the upcoming US second-quarter GDP data due for release on Thursday, is keeping investors on high alert.

Technical analysis and scenarios:

Gold (XAU/USD) is currently trading at 1970.00, presenting traders with a relatively positive technical bias. According to the Alligator indicator, the uptrend may be in its early stages as the jaw (blue line) has dipped below the lips and teeth (green and red lines). In addition, both the Awesome Oscillator (AO) and Accelerator Oscillator (AC) are in the green zone, near the zero level, which is a solid confirmation of a buy signal.

Main scenario (BUY)

Recommended entry level: 1980.00.

Take Profit: 1990.00.

Stop Loss: 1975.00.

Alternative scenario (SELL)

Recommended entry level: 1960.00.

Take Profit: 1950.00.

Stop loss: 1965.00.