XAU/USD Current price: $2,589.77

• The Federal Reserve’s decision to trim interest rates put the US Dollar on a bearish path.
• The Bank of Japan will announce its decision on monetary policy on Friday.
• XAU/USD resumed its advance and aims to extend gains beyond $2,600.

Spot Gold recovered its bullish tone early on Thursday, and traded as high as $2,594.75 a troy ounce, holding on to gains and changing hands at around $2,590 mid-American session. Stock markets reflect the optimism that harms US Dollar’s demand, following the Federal Reserve (Fed) monetary policy announcement. The Fed trimmed interest rates by more than anticipated on Wednesday, kick-starting a new monetary policy cycle with a 50 basis points (bps) cut to the benchmark rate.

Fed officials’ message, however, was not as dovish as expected. As usual, Chairman Jerome Powell maintained a cautious tone, refraining from explaining future action, and repeating the decisions will depend on upcoming data. The US Dollar moved back and forth with the news, but resumed its slump with the Asian opening, as global indexes edged north, welcoming lowering borrowing costs in the world´s largest economy.

Encouraging United States (US) data provided temporal support to the USD ahead of Wall Street’s opening.  The country published  the Q2 Current Account, which posted a deficit of $266.8 billion. Initial Jobless Claims for the week ended September 13 improved to 219K while the Philadelphia Fed Manufacturing Survey printed at 1.7 in September, much better than the previous -7 or the expected -1.

The Bank of Japan (BoJ) will announce its monetary policy decision early on Friday, and market participants anticipate no changes to the monetary policy. Any announcement that diverges from expectations will likely bring volatility back and affect Gold price.

XAU/USD short-term technical outlook  

XAU/USD is on its way to retest its recent highs and even extend its gains, despite the positive market mood, as investors drop the USD. Technical readings in the daily chart support such a scenario, as technical indicators head firmly north well above their midlines. At the same time, all moving averages aim north, with the 20 Simple Moving Average (SMA) providing dynamic support at around $2,527.

The near-term picture is also bullish. In the 4-hour chart, technical indicators have extended their advances within positive levels, although with limited upward strength as the XAU/USD pair develops below its recent peaks. Finally, the 100 and 200 SMAs gain upward traction far below the current level, while a flat 20 SMA attracts intraday buyers in the $2,570 region.

Support levels: 2,574.80 2,561.65 2,550.00  

Resistance levels: 2,605.00 2,620.00 2,640.00