Gold Traders Sidelined Ahead Of Fed Decisions

At $1,871.10, the gold price is firmer on Tuesday, rising from a low of $1,850.47 to a high of $1,878.14 so far. The price has upheld the bid in synch with a slight retreat in US Treasury yields and the US dollar ahead of this week’s Federal Reserve went.

The US benchmark 10-year Treasury yields drifted away from the 3% level on Tuesday, marking a low of 2.915% so far. Meanwhile, the dollar index, DXY, was down 0.16%, making bullion less expensive to other currency holders.

Investors are in anticipation of the Fed and expect the central bank to hike rates by 50 basis points at the end of a two-day meeting on Wednesday in order to combat soaring inflation. Traders will be looking to the comments by Chairman Jerome Powell for further clues on future rate hikes.

If the outcome of the FOMC meeting is more hawkish than expected, gold could come under pressure again while a more dovish than expected outcome and ongoing concerns for geopolitics could see the safe haven quality of gold appealing to investors.

Analysts at TD Securities argued that ”gold prices are still vulnerable to a positioning squeeze, with both CTA trend followers and technicians set to liquidate additional length below the $1840/oz range.”

”The bar is low for additional outflows in the yellow metal, but tomorrow’s knee-jerk reaction may also whipsaw traders with the Fed’s move well telegraphed, notwithstanding the elevated anxiety levels,” the analysts concluded.

As for the greenback, it came under pressure against a basket of currencies on Tuesday, as investors start to move to the sidelines ahead of the Fed. With inflation running at its fastest pace in 40 years, DXY hit a 20-year high at the end of last week’s business on expectations the US central bank will be more aggressive than its peers while expecting a stronger US economy than that of the eurozone.

A gauge of global equity markets rose slightly on Tuesday. MSCI’s gauge of stocks across the globe (IACWI) gained 0.23% and the pan-European STOXX 600 index (.STOXX) rose 0.09% after surviving a “flash crash” on Monday in Nordic markets caused by a sell order trade by Citigroup. nevertheless, it is a bit more of a chop on Wall Street in late mid-day trade with both the NASDAQ and Dow Jones in the red while the S&P 500 is just about hanging on in the green.

Technically, gold price has been pressured this week to below a weekly structure which could turn out to be significant for the days ahead.

As illustrated, the price has moved below the weekly structure to test the demand area which is so far holding up. Should the bulls take control, there will be prospects of the resistance are holding that could result n a downside extension towards the trendline support.