Gold Price Analysis: XAU/USD to remain capped below resistance in $1790 area ahead of Wednesday’s Fed meeting

Spot gold (XAU/USD) prices continue to trade in a subdued manner at the start of the week, with prices remaining within this week’s pre-established $1780-$1790ish ranges. The $1790 level and the 200 and 50-day moving averages just above it (at $1793 and $1796 respectively) provide substantial resistance, as has been the case for the whole of the month so far. The $1790ish ceiling to the price action is likely to remain in place with precious metals markets now in wait-and-see mode ahead of Wednesday’s FOMC policy announcement. The bank is expected to announce plans to quicken the pace of its QE taper, whilst the updated dot plot will likely indicate multiple hikes are expected by Fed policymakers in 2022.

Ahead of the Fed meeting, there are a few key US data releases worth noting, including Tuesday’s November PPI release at 1330GMT, followed by Wednesday’s November Retail Sales release, also at 1330GMT. The former should likely show that US producers continue to face heavy inflationary pressures, with the YoY headline rate seen above 9.0%. Some are touting the risk of an upside surprise perhaps having the ability to spur some upside in US yields, which are currently mostly flat on the session, with this potentially weighing on gold.

For reference, the US 10-year nominal yield is up about 1bps on the day but remains under 1.45% and well below its pre-Omicron levels, reflecting bond market participant’s seemingly bleak outlook for the US economy’s long-term growth and inflation prospects. The US 10-year TIPS yield (the real 10-year yield) continues to trade broadly within recent ranges and is close to the -1.0% level. Data ahead of the Fed meeting is unlikely to shift the macro narrative (i.e. of a bullish, high inflation US economy) much, unless of course there is a big miss on expectations.

Should a more hawkish than expected Fed outcome on Wednesday prompt upside in real yields (and likely also the US dollar), then spot gold prices may find themselves in trouble. For now, any further rallies to $1790 likely remain a sell, with bears likely to target recent lows in the $1760s-$1770 area.