Gold Price Analysis: XAU/USD struggles to extend Fed-led run-up beyond $1,850, US stimulus in focus

• Gold battles Wednesday’s high despite a U-turn from $1,844 post-Fed.
• Fed’s long-term bearish outlook, Powell’s readiness to increase QE propelled the bullion.
• US policymakers march towards aid package deal, Brexit is also diverting from no-deal signals.
• Capitol Hill updates will be the key as the dust settles after Fed’s drama.

Gold bulls seem tiring around $1,866, currently near $1,863, as Wednesday’s North American trading session comes to an end. While optimism surrounding US coronavirus (COVID-19) stimulus and the upbeat Brexit headlines favored the risks, US dollar weakness added a cherry on the pie after the Fed’s dovish outlook. Though, bullion traders turn cautious as the American Congress jostles with the much-awaited stimulus and the Fed-led showdown ends.

Powell and Company keeps gold buyers happy…

Despite offering no change in the current monetary policy, not to mention the quantitative easing (QE), the Federal Reserve policymakers conveyed their dovish outlook for the long-term while showing commitment to supporting the economy until they see “substantial further progress” in employment and inflation. Fed Chair Jerome Powell struck cautious statements, citing disinflation pressure while expecting the economy to strengthen in the second half of 2021. The US dollar index (DXY) bounced off the fresh low since April 2018, flashed earlier in the day, but the U-turn couldn’t last long.

On the other hand, American policymakers are inching closer to the much-awaited covid aid package. However, US President-elect Joe Biden recently poured cold water on expectations of a deal today. The Capitol Hill members are eyeing an immediate offer of around $900 billion but are divided over certain issues relating to state and government, as well as corporate liability.

Other than the Fed and stimulus, Brexit headlines are coming in positive while the vaccine updates also favor the mood. It should, however, be noted that the virus resurgence is taking a toll on the mood with multiple local lockdowns and fear of fresh variants.

Against this backdrop, Wall Street benchmarks close the day with mixed feelings while the US 10-year Treasury yields stay above 0.90%.

Moving on, updates from the US diplomats, over the virus stimulus, will be the key as global traders catch a breather after the Fed decision and Powell’s speech. Also important will be the virus and Brexit developments as well as a busy calendar in Asia.

Technical analysis

A one-month-old falling trend line, currently around $1,867, keeps gold bulls chained. However, a sustained trading above 21-day SMA, at $1,846.50 now, raise bars for the sellers’ entry.