- Gold price extends its struggle with 50 DMA at $1,932 amid risk aversion.
- US Treasury bond yields track Oil prices higher on inflation woes, ahead of Fed decision.
- Gold price awaits Bull Cross confirmation, Jerome Powell for a fresh directional move.
Gold price is off the two-week high at $1,937, treading water near $1,930 early Wednesday, as buyers eagerly await the US Federal Reserve (Fed) interest rate decision for resuming the recent uptrend.
Gold price gains from multiple catalysts ahead of the Fed
The United States Dollar (USD) has entered a phase of bullish consolidation near a six-month high against its main competitors, supported by the latest rally in the US Treasury bond yields and broad risk aversion.
Traders are risk averse, as a typical caution prevails ahead of the Fed policy announcement and Chairman Jerome Powell’s press conference. All eyes also stay focused on the Fed’s updated economic projections, the so-called ‘Dot Plot’ chart, which will be key to gauge whether one more rate hike remains in the offing. In light of these events, traders refrain from placing fresh bets on the US Dollar, leaving Gold price gyrating in a familiar range.
Additionally, risk-off flows gathered steam after the People’s Bank of China (PBOC) left the Loan Prime Rate (LPR) unchanged across the time horizon. Markets were expecting a rate cut to China’s prime lending rate, which would ease the property market concerns and help boost the economic recovery. Investors are also worried that the recent surge in Oil price could stoke up inflationary pressure worldwide, prompting the Fed to reiterate its rhetoric of ‘higher interest rate for longer.’
This narrative has helped US Treasury bond yields regain their upbeat momentum, with the benchmark 10-year Treasury yield sitting at the 16-yeat high of 4.3720%. The US Treasury bond yield rally could resume its uptrend on a hawkish Fed rate hike, extending the pullback in Gold price toward the $1,900 level. Conversely, Gold price could see a fresh upside toward $1,950 if the Fed disappoints hawks and remains ambiguous about the future policy path.
Gold price technical analysis: Daily chart
Gold price is clinging to the 50-Daily Moving Average (DMA) at $1,931, having managed to close above the latter on Tuesday, despite a modest pullback.
The 14-day Relative Strength Index (RSI) indicator is keeping its range above the 50 level, favoring Gold buyers.
Adding credence to the potential upside in Gold price, the 21 DMA has broken above the 200 DMA but a daily closing is eyed to validate a Bull Cross.
The Fed interest rate decision, however, will hold the key to determining the next direction for Gold price.
A hawkish Fed hike could provide extra legs to the ongoing correction in Gold price, fuelling a sell-off toward the $1,900 mark.
Ahead of that, the confluence of the 21 and 200 DMAs at $1,924 and the $1,910 round figure could lend support to Gold buyers.
On the other hand, if the Fed fails to convince markets about one more rate hike by year-end, a fresh upswing will be seen toward the September high of $1,953 should Gold price manage to take out the mildly bullish 100 DMA at $1,944.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.