Gold Price Forecast: XAU/USD struggles below $1,770 level, focus remains on FOMC decision

Update: Gold remained on the defensive heading into the European session and was last seen trading around the $1,769-68 region, just above a one-and-half-week low touched in the previous day. The US Producer Price Index released on Tuesday reinforced hawkish Fed expectations and continued acting as a headwind for the non-yielding yellow metal. That said, a softer tone surrounding the US dollar extended some support to the dollar-denominated commodity. Apart from this, renewed concerns about the economic fallout from the spread of the new Omicron variant of the coronavirus helped limit deeper losses for the safe-haven XAU/USD.

Investors also seemed reluctant to place any aggressive bets, rather preferred to move on the sidelines ahead of the highly anticipated FOMC policy decision, due later during the US session. Given that the markets have been pricing in the possibility for an eventual lift-off by June 2022, investors will look for fresh clues about the Fed's strategy on interest rates. This will play a key role in determining the next leg of a directional move for gold prices. In the meantime, traders might take cues from the release of the US monthly Retail Sales figures to grab some short-term opportunities around the precious metal.

Previous update: Gold (XAU/USD) stays steady at around $1,772, keeping the bounce off four-month-old support during early Wednesday.

The bullion prices dropped in the last two days amid escalating fears of the South Africa covid variant, dubbed as Omicron, as well as hawkish hope from the US Federal Reserve (Fed). However, vaccine news challenges the virus woes while a sustained fall in the US inflation expectations and a jump in the coronavirus infections may stop the Fed hawks during today’s Federal Open Market Committee (FOMC).

Australia’s most populous state New South Wales will have 25k new covid cases daily, per a model shared by ABC News, whereas the UK is likely to witness further Omicron-linked hospitalizations and a lack of rapid testing kits. Elsewhere, China and Europe seem struggling with the COVID-19 variant but Japan tries to be optimistic. Furthermore, Pfizer report 70% efficacy of its vaccine’s three shots versus Omicron hospitalization and 33% safety against infection. The drugmaker also reported that its experimental COVID-19 pill, Paxlovid, is effective to tame all covid variants, including Omicron.

On the other hand, a drop in the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, to 11-week low contrast with a record high Producer Price Index (PPI) for November to test Fed hawks. “We expect the monthly pace to be doubled to $30bn from $15bn, consistent with QE ending in mid-March instead of mid-June. Officials will likely also convey a more hawkish tone through changes to the statement, the economic projections, and the dot plot. We expect the median dot to show a 50bp increase in the fund's rate in 2022,” said TD Securities.

Elsewhere, geopolitical and trade tensions between the US and China, as well as America-Iran, also weigh on the market sentiment but gain a little response pre-Fed.

Amid these plays, the US Treasury yields and the S&P 500 Futures remain sluggish while portraying the pre-Fed market sentiment. On the same line is a mixed performance by the Asia-Pacific stocks.

Looking forward, the gold prices are likely to remain vulnerable as Fed is up for a big battle with inflation. However, Omicron stays ready to throw a wild card.

Technical analysis

After multiple pullbacks from 200-DMA and a fortnight-long sideways performance, gold bears flex muscles while bounding off an upward sloping support line from August, around $1,770.

Given the downside MACD signals and RSI conditions, sellers are likely keeping the controls should the quote mark a decisive break of the $1,770 support.

Following that, 61.8% Fibonacci retracement of August-November upside near $1,760 and the $1,738 may act as a buffer before directing the quote towards September’s low near $1,721.

Meanwhile, an upside clearance of the 200-DMA level surrounding $1,793-94 won’t be an open invitation to the gold buyer as multiple levels from October 22 will test the upside momentum near $1,814-15.

Even if the gold prices cross the $1,815 resistance, tops marked in July and September around $1,834 will precede the $1,850 level to test the advances targeting November’s peak of $1,877.

Gold: Daily chart

Trend: Further weakness expected

Additional important levels

Today last price 1772.26
Today Daily Change 1.07
Today Daily Change % 0.06%
Today daily open 1771.19
Daily SMA20 1794.34
Daily SMA50 1796.33
Daily SMA100 1789.69
Daily SMA200 1793.96
Previous Daily High 1789.56
Previous Daily Low 1766.47
Previous Weekly High 1793.17
Previous Weekly Low 1770.19
Previous Monthly High 1877.23
Previous Monthly Low 1758.92
Daily Fibonacci 38.2% 1775.29
Daily Fibonacci 61.8% 1780.74
Daily Pivot Point S1 1761.92
Daily Pivot Point S2 1752.65
Daily Pivot Point S3 1738.83
Daily Pivot Point R1 1785.01
Daily Pivot Point R2 1798.83
Daily Pivot Point R3 1808.1



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.

Feed news Join Telegram

Recommended content

Recommended content

Editors’ Picks

AUD/USD eyes 0.7100 on Inverted H&S breakout

AUD/USD eyes 0.7100 on Inverted H&S breakout

The AUD/USD pair has witnessed a minor pullback after hitting a high of 0.7072 in the New York session. Earlier, the aussie bulls displayed a firmer rally after recording a fresh yearly low of 0.6829 last week.


EUR/USD retains gains and hovers near 1.0600

EUR/USD retains gains and hovers near 1.0600

EUR/USD peaked at 1.0607, now trading in the 1.0580 price zone. The rally was all about the broad greenback’s weakness despite demand for safety continues. Soft US data added to the bullish case.


Dollar’s sell-off underpins gold

Dollar’s sell-off underpins gold

Gold is up to on Thursday, trading above $1,840 after hitting an intraday high of $1,849.18. The dollar changed course after soaring on Wednesday and is in franc decline across the FX board. However, action in stock markets is choppy. 

Gold News

Cardano is still on pace to retest $0.40, but bears shouldn't get too excited

Cardano is still on pace to retest $0.40, but bears shouldn't get too excited

Cardano is on professional traders' urgent watchlist as the digital asset could enter a mid-term bottom in the $0.45 zone before rallying upwards towards $0.60. ADA, like several cryptos, has been in a steep bear rally, which demands the need for balance and proportion.  

Read more

Warning signs in China's economic outlook as COVID-19 spreads

Warning signs in China's economic outlook as COVID-19 spreads

New variables both within and outside of China in 2022 have placed the country's economy under new pressure. In the first quarter, its economic growth rate was only 4.8%, which was 0.7 percentage points lower than the annual economic growth target of 5.5%.

Read more