How will the Fed's meeting impact next week's gold price?

Gold prices rose sharply this week, from $3,345/oz to $3,439/oz, as investors worried about the risk of financial market instability caused by US President Donald Trump's constant pressure on the Fed Chairman to cut interest rates, as well as rumours that Trump may fire the Fed Chairman.

However, the upward trajectory in gold prices was not sustained as the US constantly secured trade deals with countries such as Japan, Indonesia, and the Philippines, therefore reducing trade tensions. This caused the price of gold to fall sharply for three consecutive trading sessions, with the price dropping as low as 3,325 USD/oz and closing at 3,336 USD/oz.

In the Vietnamese gold market, the price of SJC gold bars rose from VND 121.2 million/tael to VND 122.7 million/tael in the first few sessions of the week, before falling to VND 121.1 million/tael.

Additionally, the outflow of capital into stocks, which led key global stock indexes to increase substantially, had a negative influence on gold prices.

Phillip Streible, Senior Analyst at Blue Line Futures, believes that gold prices are likely to fall further as investors move their funds into the stock market in response to encouraging signals in trade talks between the United States and several of its trading partners. Meanwhile, the EU is expected to achieve a trade deal with the US, similar to the one between the US and Japan.

Concerns about the trade war are starting to ease. As a result, we continue to see a shift of investment capital from gold to riskier assets such as stocks...", commented Phillip Streible, noting that gold prices may fall further next week as the Fed is expected to decide to keep interest rates unchanged at its monetary policy meeting on July 31st, allowing the USD to recover in the short term. The Fed's decision will dominate the gold market next week.

Notably, this week marks the fourth time gold prices have breached the $3,400 barrier but failed to stay above it. This is prompting technical risks to rise, particularly as the price of gold has gone below the 50-day moving average (MA50), which is equivalent to $3,340 USD/oz.

According to technical analysis, a three black crows pattern (three long-bodied red candles) has developed on the daily chart, suggesting that sellers have held control over the last three trading sessions with no buying pressure. This frequently indicates that the price of gold is transitioning from its current high trend to a protracted falling phase. This technical signal also fits nicely with the background of several underlying issues, such as geopolitical disputes, trade fights, and low physical gold demand in the summer, which are no longer as strong a support for gold prices as they were previously. However, many analysts believe that if gold prices fall substantially, it will be a good time to purchase, as gold prices are still expected to climb significantly in the long run.

According to technical analysis, if the gold price continues to decrease next week and goes below 3,246 USD/oz, it is likely to fall rapidly to 3,150 USD/oz, or perhaps 3,050 USD/oz. Meanwhile, gold prices will continue to face firm resistance above $3,450/oz next week.

In addition to the FOMC meeting, the gold market will get non-farm payrolls data from the United States next week. If this index falls more drastically than projected, it would reinforce predictions that the Fed will keep interest rates at current levels in subsequent sessions, forcing gold prices to fall even lower next week.