As gold price awaits FOMC decision The (XAU/USD) continues its sideways consolidation as investors eagerly await the crucial Federal Reserve (Fed) decision, which is expected to provide meaningful directional impetus. Amidst a backdrop of robust US consumer and producer inflation figures, speculation looms regarding potential rate cuts by the Fed. The hawkish outlook has bolstered US Treasury bond yields, supporting the US Dollar (USD) and posing challenges for the non-yielding gold market. Additionally, bullish sentiment in global equity markets has dampened demand for the safe-haven asset. However, geopolitical risks persist, keeping bearish traders cautious.
Market Overview
Last week’s release of strong US inflation figures led to a trimming of bets for an interest rate cut in June, contributing to elevated US Treasury bond yields and a stronger USD. Consequently, gold prices have faced resistance. Market expectations suggest less than a 50% likelihood of a rate cut in June, with potential adjustments to the Fed’s interest-rate projections. The benchmark 10-year US government bond yield reached its highest level since November 30, further bolstering the USD and restraining gold price movement. Despite geopolitical tensions, Wall Street’s bullish performance, with the S&P 500 reaching record highs, has diverted investor focus from gold.
Read more: US Federal Reserve Decision Preview (March 2024): Focus on Interest Rates Amid Inflation Rebound
Gold Price Awaits FOMC Decision
Investors are eagerly awaiting the outcome of the two-day FOMC monetary policy meeting for clues about future rate-cut paths. While the Fed is expected to maintain rates, attention will be on the “dot plot” for indications of rate adjustments this year, which will significantly impact gold prices. Fed Chair Jerome Powell’s post-meeting comments could inject volatility into financial markets and influence gold price movement.
Technical Analysis
Technically, amidst a recent pullback from record highs, a bullish flag pattern has formed, suggesting potential upside for gold prices. Indicators on the daily chart, while easing from overbought levels, remain in positive territory, supporting a constructive outlook. A breakout above the descending channel could propel gold towards intermediate hurdles at $2,175-2,176 and the record peak near $2,195. Further momentum above $2,200 could signal a continuation of the uptrend.
On the downside, $2,145-2,144 has emerged as a strong support level. A breach below this could expose support near $2,128-2,127 before a deeper corrective decline towards $2,100.
Conclusion
As gold price awaits FOMC decision, market participants are on edge for significant directional impetus. While bullish technical patterns suggest potential upside, the outcome of the Fed meeting and subsequent market reaction will dictate gold’s near-term trajectory. Traders are advised to monitor key support and resistance levels for potential trading opportunities amidst the evolving market dynamics.
