Gold Price Forecast: US Federal Reserve could push the metal to fresh YTD lows

Valeria Bednarik FXStreet

XAUUSD Current price: $1,666.27

The market has priced in a 75 bps Federal Reserve rate hike, but surprises could be on the table.
US Treasury yields reached fresh multi-year highs ahead of the event.
XAUUSD is neutral-to-bearish in the near term and not far from the year low.

The American dollar firms up ahead of the US Federal Reserve announcement as XAUUSD trades around $1,665 a troy ounce, down from an intraday high of $1,677.80. The greenback gains by the hand of soaring government bond yields and despite the better tone of Wall Street.

US government bond yields accelerated their advances as the Fed’s announcement looms, with the 2-year Treasury note currently yielding 4.01%, a fresh multi-year high, and the 10-year note yield at 3.57%. Wall Street, in the meantime, trades in the green, with all major indexes posting gains.

The Fed is widely anticipated to hike rates by at least 75 bps. Such a movement has been already priced in, although following the latest inflation data, speculation arose of a 100 bps hike and a more hawkish message from Powell & Co. But will policymakers dare to steep up quantitative tightening? The answer to that question will set the tone for the final trading session of the day.

Gold price short-term technical outlook

The daily chart for the XAUUSD pair shows that bears retain control. The pair trimmed early gains and trades flat for the day, well below bearish moving averages. Technical indicators, in the meantime, remain within negative levels with limited directional strength.

In the near term, and according to the 4-hour chart, the pair is neutral-to-bearish. It has broken below a flat 20 SMA, while the 100 and 200 SMAs head firmly south, far above the current level. The Momentum has turned lower but remains stuck to its midline, while the RSI accelerated its decline and currently stands around 40. The pair bottomed at $1,654.11 this year, the level to break to confirm a steeper decline.

Support levels: 1,654.10 1,643.90 1,641.75

Resistance levels: 1,680.30 1,692.35 1,707.10

View Live Chart for XAUUSD

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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