Gold price recovers early lost ground to weekly low; Fed decision looms large

Gold price (XAU/USD) extends the previous day's retracement slide from the vicinity of over a five-month peak touched last week and drops to a fresh weekly low on Wednesday. Easing concerns over the Israel-Hamas war, along with anticipation of a hawkish Federal Reserve (Fed), turn out to be key factors dragging the non-yielding yellow metal lower for the third straight day. The precious metal, however, manages to find some support near the $1,975 region and recover a major part of its intraday losses as traders refrain from placing aggressive bets ahead of the key central bank event risk. 

The Federal Reserve (Fed) is scheduled to announce its monetary policy decision later during the US session this Wednesday and is expected to maintain the status quo. In the meantime, traders will take cues from important US macro releases – the ADP report on private-sector employment, the ISM Manufacturing PMI and JOLTS Job Openings data. The lack of strong follow-through selling, meanwhile, warrants some caution for bearish traders. Adding to this, concerns about China's fragile economic recovery at the start of the fourth quarter seem to lend some support to the safe-haven Gold price. 

Daily Digest Market Movers: Gold price maintains its offered tone for the third straight day

• Gold price registered its biggest monthly rise since November 2022, albeit kicks off the new month on a weaker note in the wake of receding safe-haven demand.
• Traders are pricing in a lower risk premium from the Israel-Hamas war as no other Arab powers have joined in so far; Hamas said it will free foreign hostages in the next few days.
• The World Gold Council (WGC) said on Tuesday that high prices could dampen Gold demand in India and lead to the lowest purchase in three years during the peak festive season.
• The WGC added that central banks Gold buying fell short of the Q3’22 record, while jewellery demand softened slightly in the face of high prices and the investment picture was mixed.
• The US Dollar sticks to a positive bias on the back of expectation for any hawkish surprises from the highly-anticipated two-day FOMC monetary policy meeting.
• The Federal Reserve is scheduled to announce its decision later during the US session and is widely anticipated to hold rates steady at a 22-year high for the second straight time.
• The US economic resilience and still sticky inflation should allow the central bank to maintain its hawkish stance and leave the door open for more interest rate hikes.
• The yield on the benchmark 10-year US government bond remains close to the 5% mark, or a 16-year top touched in October and further seems to underpin the US Dollar.
• A Caixin-sponsored survey showed that business activity in China’s manufacturing sector contracted in October for the first time in three months.
• This suggests that stimulus efforts from China only provided limited support to the fragile economic recovery and could lend support to the XAU/USD.

Technical Analysis: Gold price remains well within the striking distance of a multi-month peak

From a technical perspective, the ongoing decline might still be categorized as a corrective pullback, especially after a steep rise of over 10% from the October swing low. Moreover, the Relative Strength Index (RSI) on the daily chart has eased from the overbought territory. Hence, any subsequent fall might still be seen as a buying opportunity and remain limited. The $1,970 area is likely to protect the immediate downside, below which the Gold price could drop to last week's swing low, around the $1,954-$1,953 region.

On the flip side, the Asian session peak, around the $1,986 area, now seems to act as an immediate hurdle ahead of the $2,000 psychological mark and the $2,007-2,009 region, or the multi-month top. A sustained strength beyond the latter should pave the way for an extension of over a three-week-old strong bullish trend and lift the Gold price to the next relevant barrier near the $2,022 zone.