Gold Price Analysis: XAU/USD bounces off 50-day SMA, momentum turns positive ahead of the Fed

Update: Gold is gearing up toward the all-important decision by the Federal Reserve. Will details on allowing inflation to overheat send XAU/USD higher? The technical situation looks improved after the precious metal bounced off the 50-day Simple Moving Average and momentum on the daily chart turned positive. See:Preview: How the Fed could drown markets while trying not to rock the boat

Gold prices struggle to keep the previous run-up while declining to $1,945.80 during the early Thursday morning in Asia. The yellow metal rose to the highest since September 03 on Wednesday before taking a U-turn from $1,950.90. While market sentiment remains mostly positive, a lack of catalysts and the pre-ECB cautiousness could be considered as reasons for the bullion’s recent pullback.

Risk-on pause, not tamed…

Although traders await more clues to extend Wednesday’s market reversal, S&P 500 Futures print 0.30% gains to 3,404 by the press time. The risk barometer recovered from a one-month low on yesterday as talks surrounding the European Central Bank (ECB) policymakers’ optimism and TikTok parent’s plea to not push for the entire sale to the US gained momentum. Also adding to the market’s optimism could be welcome prints of the US JOLTS Job Openings and an absence of disappointment from China’s inflation numbers.

Furthermore, the recent news that Tokyo is up for notching one level off its highest alert conditions, due to the coronavirus (COVID-19), adds to the market’s optimism.

Other than the risk-positive environment, the US dollar’s declines for the first time in the last seven days also contributed to the bullion’s positive performance.

It should, however, be noted that the Sino-American tension is still on in the background while uncertainty surrounding the Brexit deal and the US aid package continues to hurt the risk sentiment. As a result, buyers await a strong positive message from the ECB, which is less likely, to keep the recent rise.

Technical analysis

Other than the anticipated challenges to the risk, the 21-day SMA level of $1,948 also questions the precious metal’s immediate upside attempts. Hence, the odds of again witnessing $1,900 on the chart can’t be ruled out.