Short Term Forecast: Gold Pressured Ahead of FOMC Decision

Strong US macroeconomic data, including US Retail Sales, above forecast, and an improvement in Industrial Production in August, has caused gold prices to decline. The US Dollar Index (DXY) increased by 0.21% to 100.92, which put pressure on the gold. The US Fed’s monetary policy decision on Wednesday is anticipated to boost the US dollar, as it has been doing since a positive report on US retail sales in August.

Middle East geopolitical tensions are rising. Prior to the Fed’s monetary policy announcement on Wednesday, gold prices decline as the US dollar strengthens after a positive report on August retail sales. A headwind for the precious metal was the rise in US Treasury yields and the strengthening of the US dollar.

The US Dollar Index (DXY) increased by 0.21% to 100.92, which put pressure on the price of gold. In the meantime, both the long and short sides of the US Treasury yield curve saw increases. With Hezbollah in Lebanon accusing Israel of being behind the recent spate of pager blasts, there is a chance that the Middle East war would worsen. Speaking on behalf of the US Department of State, Mathew Miller stated that neither the US nor its allies were aware of the perpetrators of the incident.

Prior to the Fed’s interest rate decision and Chair Jerome Powell’s press conference on Wednesday, housing data will be included in the US economic agenda. Although gold has partly retreated, its prices are still upwards oriented, and a bearish three-candle “evening star” chart pattern is going to form for the precious metal.

Gold prices may be in good position to test the psychological barrier at $2,550, then move up to the high of August 20 (which turned out to be support at $2,531) and finally descend to the $2,485 low of September 6. On the other hand, if buyers drive prices to the record high of $2,589, the XAU/USD rally will continue.