Gold Price Forecast: XAU/USD hangs near weekly lows ahead of the pivotal FOMC decision


Update: Gold remained depressed through the first half of the European session and was last seen hovering near the lower boundary of its weekly trading range, just above the $1,780 level. This marked the second successive day of a negative move and was sponsored by expectations for an early policy tightening by the Fed, which tends to undermine the non-yielding yellow metal. The US central bank will announce its policy decision later during the US session and is expected to begin tapering its $120 billion-a-month asset purchase program.

Meanwhile, the markets have been pricing in the prospects for a potential interest rate hike in 2022 amid fears about a faster-than-expected rise in inflationary pressures. Hence, the key focus will be on the accompanying monetary policy statement and Fed Chair Jerome Powell's comments at the post-meeting press conference. Investors will look for clues about the likely timing when the US central bank will raise interest rates, which, in turn, should play a key role in determining the near-term trajectory for gold prices.

Heading into the key central bank event risk, traders on Wednesday might take cues from the US macro data – the ADP report on private-sector employment and ISM Services PMI. In the meantime, the cautious market mood extended some support to the safe-haven precious metal. This, along with a subdued US dollar price action, acted as a tailwind for dollar-denominated commodities and helped limit any further losses for gold, at least for now.

Previous update: Gold (XAU/USD) pares intraday losses around $1,782, following a downside break to the key support during early Wednesday. In doing so, the yellow metal justifies the bearish Risk Reversals (RR) to drop for the second consecutive day ahead of the all-important US Federal Reserve (Fed) meeting.

Market’s indecision ahead of the Fed’s verdict could be linked to the mixed headlines over US stimulus and inflation expectations, not to forget fresh fears of the COVID-19 third wave.

Although US President Joe Biden keeps teasing a deal on the much-awaited $1.75 trillion aid package this week, Senator Joe Manchin conveyed a less likely announcement before Thanksgiving, per CNN. Elsewhere, US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, snapped a four-day downtrend to bounce off the lowest levels since October 12 by the end of Tuesday’s North American trading.

It’s worth noting that the recent jump in the covid numbers in China, New Zealand and the UK challenges market sentiment with Bloomberg terming Beijing’s latest covid outbreak as the widespread since the Wuhan incident.

On a different page, the one-month risk reversal of gold, a measure of the spread between call and put prices, dropped the most since early August to -0.725, per the latest Reuters data. The same hints at the escalating bearish bias among the gold traders before crucial market events, namely the Fed.

In addition to the Fed, the US ADP Employment Change, ISM Services PMI and Factory Orders will also entertain the gold traders. However, major attention will be on how much tapering the US central bank manages to agree upon considering the fresh covid fears and reflation woes.

Technical analysis

Gold defies a three-week-old ascending trend channel, also slipped below 100-DMA, while printing $1,781 as a quote amid receding bullish bias of the MACD and descending RSI line.

Given the rejection of the bullish chart pattern, backed by bearish oscillators, gold prices are likely to decline towards an early October’s swing high near $1,770.

Following that, a horizontal area comprising multiple levels marked since September 16, near $1,745, holds the gate for the bullion’s further weakness target’s September’s low near $1,721.

On the flip side, a corrective pullback beyond $1,785 support confluence, now resistance, could trigger the run-up to a $1,810 level comprising a two-month-long descending trend line and a horizontal line from late August.

In a case where the gold buyers manage to conquer the $1,810 hurdle, the upper line of the short-term bullish channel near $1,824 becomes crucial for the run-up to the “double top” marked in July and September around $1,834.

To sum up, a clear downside break of a short-term rising channel lures gold bears ahead of the Fed’s verdict.

Gold: Daily chart

Trend: Further weakness expected

Additional important levels

Overview
Today last price 1782.22
Today Daily Change -5.54
Today Daily Change % -0.31%
Today daily open 1787.76
 
Trends
Daily SMA20 1779.93
Daily SMA50 1780.46
Daily SMA100 1785.88
Daily SMA200 1791.72
 
Levels
Previous Daily High 1796.44
Previous Daily Low 1786.43
Previous Weekly High 1810.47
Previous Weekly Low 1772.03
Previous Monthly High 1813.82
Previous Monthly Low 1746.07
Daily Fibonacci 38.2% 1790.25
Daily Fibonacci 61.8% 1792.62
Daily Pivot Point S1 1783.98
Daily Pivot Point S2 1780.2
Daily Pivot Point S3 1773.97
Daily Pivot Point R1 1793.99
Daily Pivot Point R2 1800.22
Daily Pivot Point R3 1804

 

 

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

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD struggles to rebound, holds near 1.1150 after US data

EUR/USD trades around 1.1150 in the early American session on Friday as investors assess the latest inflation data from the US. According to the US Bureau of Economic Analysis, Core PCE Price Index rose to 4.9% on a yearly basis in December from 4.7% in November, surpassing the market expectation of 4.8%. 

EUR/USD News

GBP/USD clings to small gains above 1.3400 on mixed US data

GBP/USD posts modest daily gains slightly above 1.3400 on Friday as the dollar rally loses steam. The data from the US showed that the core PCE inflation edged higher to 4.9% in December. On a negative note, Personal Spending contracted by 0.6% on a monthly basis.

GBP/USD News

Gold recovers modestly after US data, stays below $1,800

Gold managed to stage a rebound from the multi-week low it set below $1,780 but continues to trade deep in the red near $1,790. The benchmark 10-year US Treasury bond yield is rising more than 1% on the day after US data, limiting XAU/USD's recovery.

Gold News

Bitcoin Weekly Forecast: Federal Reserve cannot tame BTC’s uptrend

Bitcoin has experienced some significant losses over the past few weeks, with a more dramatic drop occurring this week after the Fed's decision was announced. As losses have extended and BTC has entered into the $30,000 zone, concerns regarding Bitcoin being in a bear market have increased.

Read more

Apple share price set to rise after another record quarter

With the Nasdaq closing at its lowest level in seven months yesterday, the Apple share price has also found itself on the end of the recent weakness in tech shares, down over 12% from its record highs in early January.

Read more

Forex MAJORS

Cryptocurrencies

Signatures