XAU/USD is in a bullish zone near the key $1,850 level

Gold (XAU/USD) remains in bullish territory near the psychological $1,850 level as the market awaits key Federal Reserve results during today’s midday New York session. On the other hand, the US dollar is under pressure to test the resilience of the 96 figure in the DXY, an indicator that measures the greenback against several major currencies.

There are a number of factors influencing the US dollar case, ranging from less aggressive month-end results from the Fed and the bond market’s lack of expectations for an ultra-fast rate hike by the Fed. This was evident during Tuesday’s five-year Treasury auction.
The high bid-to-bid ratio is the same as the yield when the US sells the 5-year bond at 1.533% compared to the WI of 1.547% when it sells $55 billion. This is the highest yield since October 2019. The previous was 1.263% and the hedging bid was at 2.50 versus 2.41 previously. This suggests that the market may be pricing the Fed too hawkish in the medium term, which has weighed on the US Dollar.
For the Fed, “The fact that funds are likely to raise rates in March has been well communicated, so the ‘prepare for takeoff’ signal will not move the market. More important will be any indication of the likely pace of tightening, via QT as well as fund rates, in the next year/year,” TD Securities analysts argued.

The yellow metal rallied for the past two days in a row, also breaching the key northbound barrier a day earlier, as traders flocked to traditional risk-off amid market worries about where to go next for the US Federal Reserve (Fed). Adding to the upside could be geopolitical tensions and pessimistic economic forecasts from the International Monetary Fund (IMF).

Fed hawks rejected US Consumer Confidence numbers weaker than CB and Richmond Fed Manufacturing Index on firmer US inflation expectations, over 10 breakeven inflation rate year according to data from the Federal Reserve Bank of St. Louis (FRED). gold buyers. The inflation gauge rose for a third consecutive day on Tuesday after falling to its lowest level since September on Jan. 20. In a different development, the United States, United Kingdom and European Union ( EU) is determined to impose economic sanctions on Russia if it invades Ukraine, which keeps geopolitical concerns on the table.
In addition, the IMF’s No. 2 official, Gita Gopinath, a day earlier made pessimistic economic forecasts as Omicron spreads. “We expect global growth this year to be 4.4%, 0.5 percentage points lower than expected, mainly due to a downgrade in the US and China,” the IMF’s Gopinath told Reuters.

Additionally, the recent passage of the US COMPETITION Act is providing further support to gold prices amid concerns about an escalation in the US-China relationship. Amid mood swings, US Treasury yields remained behind as S&500 futures posted the latest slight gains. That said, Wall Street posted losses and the US Dollar Index (DXY) rallied a day earlier.

Moving on, gold buyers keep their eyes on the Fed`s verdict amid increasing hopes of witnessing March rate hike clues. It should, however, be noted that the recent doubts over the monetary policy tightening amid Omicron spread may push Powell to sound cautiously optimistic, which in turn could propel the gold`s upside, by taking the USD.