- Gold is on the verge of a downside breakout while below $1,790.
- The Fed is the main event for the day and a hawkish outcome could weigh on gold.
- The price is below bearish leaning daily 10 and 20 EMAs.
Update: Gold (XAU/USD) traders lick their wounds after the biggest daily fall in three weeks around $1,772, up 0.10% intraday, during Wednesday’s Asian session.
The bright metals slumped the previous day after US Producer Price Index (PPI) for November refreshed the record top to 9.6% YoY, versus the previous 8.6%. Adding to the bearish catalysts were fears of Omicron and a rebound in the US Treasury yields, as well as firmer US Dollar Index (DXY).
That said, the Wall Street benchmarks closed negative but the S&P 500 Futures print mild gains by the press time.
Market’s pre-Fed caution and hopes of faster stimulus from the US, as well as relief over the debt ceiling issue, seem to underpin the latest corrective pullback of the gold prices.
Looking forward, Fed’s verdict will be the key as virus woes battle inflation fears and the policy hawks flex muscles.
Read: Fed December Preview: Gold stays vulnerable as Fed looks to battle inflation
End of update.
The price of gold, XAU/USD, is down some 0.90% on the day trading near $1,770 and falling from a high of $1,789.54 to a low of $1,766.58. The greenback has done well in a slightly risk-off market environment which has favoured the greenback over its other safe haven peers, such as gold.
All eyes on the Fed
The US dollar, as measured by the DXY index and vs a basket of major currencies, rallied from a low of 96.10 to a high of 96.59 so far. The Federal Reserve is eagerly awaited today which weighed on equities that traded on the defensive, aiding the greenback to move higher. The S&P 500 dropped 0.8% to 4,634.09 and the Nasdaq Composite fell 1.1% to 15,237.64, while the Dow Jones Industrial Average slipped 0.3% to 35,544.18. The 10-year US Treasury yield rose 2 basis points to 1.44%.
The Federal Reserve began a two-day policy meeting at which it could decide to pare its asset purchases faster than previously planned. The Fed is expected to show a higher dot plot and to double the pace of tapering from USD15bn to USD30bn. ''Fed fund futures are currently pricing 68bps of tightening for next year with fed funds at 1.40% by the end of 2023,'' analysts at ANZ Bank explained.
''Anything in excess of that, or a higher terminal rate (currently 2.5%), will be seen as hawkish. It will also be important to watch the inflation and unemployment forecasts,'' the analysts added. ''In September the FOMC forecast inflation at 2.2% in Q4 2022 and 2023 with the unemployment rate at 3.8% and 3.5% respectively. If inflation forecasts are raised it would show greater uncertainty about the FOMC’s confidence in meeting its inflation target.''
Gold technical analysis
Technically, from a daily perspective, the price is below bearish leaning 10 and 20 EMAs and it could be on the verge of breaking the daily support. However, failures to do so could lead to an upside breakout as follows:
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: Extra gains in the pipeline above 0.6520
AUD/USD partially reversed Tuesday’s strong pullback and regained the 0.6500 barrier and beyond in response to the sharp post-FOMC pullback in the Greenback on Wednesday.
EUR/USD meets support around 1.0650
EUR/USD managed to surpass the key 1.0700 barrier in response to the intense retracement in the US Dollar in the wake of the Fed’s interest rate decision and Chair Powell’s press conference.
Gold surpasses $2,300 as Dollar tumbles
The precious metal maintains its constructive stance and trespasses the $2,300 region on Wednesday after the Federal Reserve left its FFTR intact, matching market expectations.
Bitcoin price reclaims $59K as Fed leaves rates unchanged
The market was at the edge of its seat on Wednesday to see whether the US Federal Reserve (Fed) would cut interest rates during the Federal Open Market Committee (FOMC) meeting.
The market welcomes the Fed's statement
The market has welcomed the Fed statement, and the S&P 500 is higher in its aftermath, the dollar is lower and Treasury yields are falling. There is still only one cut priced in by the Fed.