XAU/USD sees upside to $1,980 after a hiatus, Fed’s policy guidance eyed

XAU/USD eyes an upside to $1,980.00 amid uncertainty over a long weekend in global markets.
The multi-decade print of US CPI has bolstered the odds of a jumbo rate hike by the Fed.
The speech from Fed Chair Jerome Powell will keep investors busy this week.

Gold (XAU/USD) is hoping for significant bids attraction after a hiatus on Monday that will drive the gold prices to a high of $1,980.00. A long weekend in the global markets generally creates uncertainty, which forces the market participants to bank upon liquidity at hold or channelization into the safe-haven assets.

As quickly as we are inching towards the announcement of the monetary policy by the Federal Reserve (Fed), which will happen on May 3-4, gold investors will react largely upon the guidance by Fed policymakers. Considering the recent dictations by the Federal Open Market Committee (FOMC) members, an interest rate decision of 50 basis points (bps) rate hike has received tremendous bets. To combat the soaring inflation, think tanks of the Fed believe that an aggressive interest rate hike by the Fed is highly required. Also, the guidance from the Fed should be hawkish considering the multi-decade high inflation figures and proactive requirement of reversion to neutral rates.

Last week’s higher US Consumer Price Index (CPI) at 8.5% has cleared that the Fed is left with no other option than to feature a jumbo rate hike. This will keep the gold prices on the edge. Also, the aggressive rate hikes by the Bank of Canada (BOC) and Reserve Bank of New Zealand (RBNZ) have bolstered the chances of a similar gesture from the Fed.

In the American session, investors will focus on the speech from the St. Louis Fed President and FOMC member James Bullard, which will provide insights into the likely monetary policy action by the Fed. However, the mega event will be the speech from Fed Chair Jerome Powell, which is due later this week.

Gold Technical Analysis

On a daily scale, XAU/USD has tested the breakout of its previous critical level at March 24 high $1,966.18 multiple times. The 20- and 50-Exponential Moving Averages (EMAs) at $1.946.35 and $1,922.26 respectively are scaling higher, adding to the upside filters. The momentum oscillator Relative Strength Index (RSI) (14) has overstepped 60.00, which indicates a firmer bullish momentum going forward.