Gold drops to 1-week lows around $1220 area, FOMC in focus
| • Resurgent USD demand prompts exerting fresh downward pressure.
• Risk-on mood/rising US bond yields add to the prevalent selling bias.
• The upcoming FOMC announcement could determine the near-term trend.
Gold edged lower through the early European session on Thursday and touched one-week lows, around the $1221 area in the last hour.
The precious metal extended overnight late retracement from weekly tops, with a combination of negative factors exerting additional downward pressure for the fifth consecutive session on Thursday.
With investors looking past the US midterm election results, a goodish US Dollar rebound from 2-1/2 week tops was seen as one of the key factors weighing on the dollar-denominated commodity.
Adding to this, the prevalent risk-on mood, as depicted by a positive tone around equity markets, reaffirmed by an uptick in the US Treasury bond yields further dented the precious metal's safe-haven status.
Ahead of today's key event risk, the latest FOMC monetary policy update, investors seemed reluctant to place any fresh bets and eventually did little to lend any support, or stall the ongoing slide.
Although the Fed is widely expected to leave interest rates unchanged, indications to raise interest rates for the fourth time this year in December might further collaborate towards driving flows away from the non-yielding yellow metal.
Hence, a follow-through weakness, possibly even below 100-day SMA support near the $1217-16 region, now looks a distinct possibility amid absent relevant market moving economic releases from the US.
Technical levels to watch
Weakness below the mentioned 100-DMA support is likely to accelerate the slide towards $1212 support ahead of $1208 and the key $1200 psychological mark. On the flip side, $1227 horizontal zone now seems to act as an immediate hurdle, above which the commodity seems all set to aim towards resting the $1233-34 supply zone.
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