Gold prices (XAU/USD) have shown little movement ahead of the Federal Open Market Committee (FOMC) decision on Wednesday, failing to capitalize on the previous day’s rebound from a one-week low. As traders opt to stay on the sidelines, the yellow metal is oscillating between modest gains and slight losses as it heads into the European session. The market sentiment appears cautious, with many waiting for the crucial FOMC policy decision before making any significant moves.
Expectations that the Federal Reserve may adopt a less dovish stance have bolstered US Treasury yields and supported the US Dollar (USD), which continues to limit gold’s upside potential. Despite this, ongoing geopolitical risks—particularly the ongoing Russia-Ukraine conflict, Middle East tensions, and trade war concerns—remain supportive of safe-haven assets like gold, helping to cap further declines.
Traders Eye FOMC Decision Amid Geopolitical Risks
Gold market participants are largely taking a wait-and-see approach ahead of the FOMC meeting, which is expected to set the tone for US monetary policy in the coming months. On Tuesday, the US Census Bureau reported a stronger-than-expected 0.7% increase in Retail Sales for November, surpassing both market expectations and the previous month’s 0.4% gain. While this reflects the underlying strength of the US economy, it has done little to alter the expectation that the Fed may pause rate cuts during its January meeting.
The likelihood of a less dovish Fed has contributed to rising bond yields, with the benchmark 10-year US Treasury bond yield reaching its highest level since November 22. This has acted as a headwind for gold, which offers no yield of its own.
Meanwhile, geopolitical tensions continue to simmer. Ukraine reported an explosion in Moscow that killed Igor Kirillov, the head of Russia’s military nuclear and chemical weapons protection forces, escalating concerns over further military clashes. In Syria, UN officials warned that conflicts persist despite the fall of President Bashar al-Assad, with clashes ongoing between Turkish-backed and Kurdish forces. Additionally, reports suggest that Israel and Hamas could be edging closer to a ceasefire agreement, potentially easing some of the tensions in the region.
US Economic Data and Focus on Fed’s Decision
The release of housing market data, including Building Permits and Housing Starts, is expected to draw some attention in the US later today. However, the primary focus will remain on the FOMC’s monetary policy decision. Investors will be closely watching the updated economic projections and comments from Fed Chair Jerome Powell for any indications regarding the future trajectory of interest rates, which will influence the demand for the US Dollar.
Technical Outlook for Gold
From a technical perspective, gold prices may face resistance near the weekly high around $2,664–2,666, which was reached on Monday. Should the price break above this level, it could push towards the $2,677 region and potentially reclaim the $2,700 mark. A sustained upward movement could extend towards the monthly swing high of $2,726, potentially resuming gold’s upward trajectory.
On the downside, the immediate support is seen at the overnight low of $2,633, followed by the monthly low at $2,614. A decisive break below the $2,600 level could signal further bearish momentum, potentially triggering a continuation of the recent sharp pullback from gold’s one-month peak touched last week.
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