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Gold Price Consolidates as Traders Await FOMC Decision

Gold Price Steady as Traders Await FOMC Rate Decision

Gold Price Consolidates as Traders Await FOMC Decision

Gold price (XAU/USD) remains subdued, oscillating between modest gains and losses heading into Wednesday’s European session. The precious metal struggles to build on its recovery from a one-week low as traders adopt a cautious stance ahead of the Federal Open Market Committee (FOMC) policy announcement later today. Expectations of a less dovish Federal Reserve (Fed) continue to support elevated US Treasury yields and the US Dollar (USD), weighing on the non-yielding yellow metal.

Persistent geopolitical tensions, including the ongoing Russia-Ukraine conflict, unrest in the Middle East, and trade war fears, provide a degree of support to safe-haven assets like gold. These factors could limit downside risks, though a lack of strong follow-through buying suggests waiting for clearer signals before anticipating a reversal of gold’s recent retracement from a one-month high.

Key Developments Influencing Gold Prices

  1. Economic Data and Fed Policy Outlook
    • US Retail Sales rose 0.7% in November, surpassing expectations of 0.5%, indicating resilient consumer spending.
    • Despite robust economic indicators, the Fed is expected to pause its rate-cut cycle, bolstered by recent moderate inflation data.
    • Elevated US Treasury yields, with the 10-year benchmark reaching its highest level since late November, present a headwind for gold.
  1. Geopolitical Risks
    • Escalating tensions in Ukraine, including a blast in Moscow reportedly targeting a key Russian military official, heighten geopolitical uncertainty.
    • Continued clashes in Syria and potential progress in negotiations between Israel and Hamas add complexity to the global risk landscape.
  1. FOMC Decision and Market Focus
    • Wednesday’s FOMC meeting will be pivotal, with investors scrutinizing updated economic projections and Fed Chair Jerome Powell’s comments for insights into future rate policies.
    • US housing market data, including Building Permits and Housing Starts, may also influence market sentiment.

Technical Outlook: Key Levels to Watch

  • Upside Potential
    • Immediate resistance lies near $2,664-$2,666, followed by the $2,677 zone.
    • A breakout above $2,700 could pave the way for a retest of the monthly high near $2,726. Sustained gains beyond this level would signal a resumption of the broader uptrend.
  • Downside Risks
    • Immediate support is seen at the overnight low of $2,633, followed by the monthly trough around $2,614.
    • A decisive break below $2,600 could trigger a deeper pullback, exposing gold to further losses toward recent lows.

In conclusion, gold prices are likely to remain range-bound until the FOMC decision provides clearer directional cues. While geopolitical risks lend support, elevated US bond yields and a strong USD cap the metal’s upside potential.