Gold price traders remain on the sidelines ahead of FOMC decision on Wednesday

  • Gold price remains confined in a narrow range as traders prefer to wait on the sidelines.
  • Reduced Fed rate cut bets revive the USD demand and act as a headwind for the metal.
  • Investors now await the FOMC decision and US macro data before placing directional bets.

Gold price (XAU/USD) continues with its struggle to gain any meaningful traction and extends its sideways consolidative price move during the Asian session on Tuesday. Growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer amid signs of still sticky inflation assists the US Dollar (USD) in attracting some dip-buying. Apart from this, easing tensions in the Middle East acts as a headwind for the safe-haven precious metal. The downside, however, remains cushioned as traders prefer to wait for cues about the Fed’s rate-cut path before placing fresh directional bets. 

Hence, the focus remains glued to the crucial two-day FOMC monetary policy meeting starting today and the release of the closely-watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Friday. This will play a key role in influencing the USD demand in the near term and provide some meaningful impetus to the non-yielding Gold price. Heading into the key central bank/US data risks, Tuesday’s US economic docket – featuring the Chicago PMI and the Conference Board’s Consumer Confidence Index – might produce short-term trading opportunities.

Daily Digest Market Movers: Gold price is undermined by hawkish Fed expectations and a modest USD strength

  • Friday’s release of the US Personal Consumption Expenditures (PCE) Price Index pointed to still sticky inflation and reaffirmed bets that the Federal Reserve will begin its rate-cutting cycle only in September. 
  • Hawkish Fed expectations act as a tailwind for the US Dollar, which, along with a generally positive risk tone, turn out to be key factors that contribute to capping the upside for the non-yielding Gold price.
  • The global risk sentiment remains well supported on the back of receding fears about any further escalation of conflict between Iran and Israel and the latest optimism over Israel-Hamas peace talks in Cairo.
  • Traders, however, now seem to have moved to the sidelines and refrain from positioning for a firm near-term direction ahead of this week’s key central bank event risk and important US economic releases.
  • The Fed is scheduled to announce its policy decision at the end of a two-day meeting on Wednesday, which will be followed by the release of the closely watched US jobs data, or the Nonfarm Payrolls report on Friday.
  • Investors will look for cues about the Fed’s future policy decisions and rate-cut path, which, in turn, should influence the USD price dynamics and help in determining the near-term trajectory for the XAU/USD. 
  • In the meantime, Tuesday’s US economic docket – featuring the Chicago PMI and the Conference Board’s Consumer Confidence Index – might provide some impetus later during the North American session.

Technical Analysis: Gold price needs to find acceptance above 200-hour SMA for bulls to seize near-term control

From a technical perspective, the Gold price has been struggling to make it through the 200-hour Simple Moving Average (SMA) barrier over the past two days. The said hurdle, currently pegged near the $2,346 region, now coincides with the 38.2% Fibonacci retracement level of the recent pullback from the all-time peak and should act as a key pivotal point. This is followed by 50% Fibo. level, around the $2,352-2,353 area, which if cleared could lift the Gold price to the next relevant hurdle near the $2,371-2,372 region. The momentum could extend further towards the $2,400 round figure en route to the all-time peak, around the $2,431-2,432 area touched earlier this month.

On the flip side, some follow-through selling and acceptance below the 100-hour SMA could make the Gold price vulnerable to retesting last week’s swing low, around the $2,292-2,291 zone, with some intermediate support near the $2,320 region. The subsequent downfall has the potential to drag the XAU/USD further towards the next relevant support near the $2,268-2,265 area.

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