Gold Price Forecast: XAU/USD clings to modest gains near $1,780 ahead of FOMC

• Gold faced rejection near 200-hour SMA for the second consecutive session on Wednesday.
• The risk-on impulse was seen as a key factor that acted as a headwind for the safe-haven metal.
• A subdued USD price action did little to lend any support ahead of the FOMC policy decision.
• Gold Price Forecast: Will XAU/USD find acceptance above this key level? Evergrande, Fed in focus

Update: After edging higher in the early European session, the XAU/USD pair lost its traction and dropped toward $1,770. With markets staying cautiously optimistic ahead of the FOMC's monetary policy announcements, however, the greenback struggled to find demand and allowed gold to edge higher. Currently, the pair is clinging to modest daily gains near $1,780. Reflecting the USD's uninspiring performance, the US Dollar Index, which tracks the currency's performance against a basket of six major peers, is posting small losses at 93.13. The Fed is widely expected to leave its policy rate unchanged but investors will keep a close eye on the revised Summary of Projections and Chairman Jerome Powell's press conference.

Gold struggled to capitalize on its modest intraday gains to the $1,780 region and faced rejection near 200-hour SMA for the second successive day. The risk-on impulse – as depicted by a generally positive tone around the equity markets – was seen as a key factor that acted as a headwind for the safe-haven precious metal. China's struggling property giant Evergrande Group said it would pay the bond interest due on Thursday and eased fears of an immediate corporate collapse. Adding to this, the Chinese central bank injected cash into the banking system and boosted the global risk sentiment.

The pullback extended through the early North American session and dragged the XAU/USD back closer to the $1,770 level in the last hour. The downside, however, seems cushioned as investors await the outcome of a two-day FOMC meeting for clues about the tapering timeline. The Fed is scheduled to announce its policy decision at 18:00 GMT. This will be accompanied by the latest economic projections and followed by a press conference hosted by Fed Chair Jerome Powell at 17:00 GMT. Any hawkish signals would dent demand for the non-yielding yellow metal and prompt aggressive selling.

Meanwhile, the US dollar, so far, has struggled to gain any meaningful traction and remained confined in a narrow trading band below one-month tops touched earlier this week. This was seen as another factor that could extend some support to dollar-denominated commodities, including gold. Hence, it will be prudent to wait for some follow-through selling before traders start positioning for the resumption of the recent sharp pullback from the $1,832-34 supply zone.

Technical outlook

From a technical perspective, the 200-hour SMA, currently around the $1,778-80 region, now seems to act as a key pivotal point for short-term traders. A sustained strength beyond should allow bulls to reclaim the $1,800 mark and aim to challenge a technically significant 200-day SMA, around the $1,806 region.

On the flip side, the $1,766-65 region is likely to act as immediate support, which if broken might turn gold vulnerable. The next relevant support is pegged near the $1,754-52 region, below which the XAU/USD is likely to accelerate the fall towards the $1,730-29 horizontal zone en-route the $1,700 round figure.