Gold price extends the range play as traders keenly await Fed rate decision

Gold price (XAU/USD) remains depressed through the first half of the European session on Wednesday, albeit it lacks follow-through selling and so far, has held above a one-week low touched the previous day. The prospects for a less dovish Federal Reserve (Fed) remain supportive of elevated US Treasury bond yields and act as a headwind for the non-yielding yellow metal. The US Dollar (USD) bulls, however, seem reluctant to place aggressive bets and opt to wait for the crucial FOMC decision. 

Investors will scrutinize the updated economic projections, including the so-called dot plot, and Fed Chair Jerome Powell's remarks at the post-meeting press conference for cues about the future rate-cut path. This, in turn, will influence the USD and provide some meaningful impetus to the Gold price. Heading into the key central bank event risk, the cautious market mood, along with persistent geopolitical risks and trade war fears, should help limit the downside for the safe-haven XAU/USD. 

Gold price struggles to attract buyers amid expectations for less dovish Fed

• The US Census Bureau reported on Tuesday that Retail Sales jumped 0.7% in November, better than the market expectation for an increase of 0.5% and the 0.4% increase recorded in the previous month.
• The data was consistent with strong underlying momentum in the economy, though it had little impact on bets that the Federal Reserve will cut interest rates at the end of a two-day meeting on Wednesday. 
• The robust consumer spending, along with the US economic resilience and warmer inflation prints in recent months, suggests that the Fed could pause its rate-cutting cycle at the January meeting. 
• The prospects for a less dovish Fed pushed the yield on the benchmark 10-year US government bond to its highest level since November 22 and should act as a headwind for the non-yielding Gold price. 
• Ukraine claims a blast in Moscow that killed the head of the Russian military’s nuclear and chemical weapons protection forces, Igor Kirillov, on Tuesday, raising the risk of a further escalation of tensions. 
• The UN’s special envoy for Syria warned that the conflict has not ended even after the ousting of President Bashar al-Assad amid clashes between Turkish-backed and Kurdish groups in the north.
• A Palestinian official involved in the indirect negotiations said that there are signs that Israel and Hamas could be moving closer to a Gaza ceasefire and hostage release deal after months of deadlock.
• Wednesday's US economic docket features the release of housing market data – Building Permits and Housing Starts. The focus, however, will remain glued to the crucial FOMC monetary policy decision. 
• Meanwhile, investors will closely scrutinize the updated economic projections and Fed Chair Jerome Powell's remarks for cues about the future rate-cut path, which will drive the US Dollar demand. 

Gold price needs to break below $2,600 for bears to seize near-term control

From a technical perspective, any subsequent move up might face a hurdle near the weekly top, around the $2,664-2,666 region touched on Monday, ahead of the $2,677 area. A sustained strength beyond the latter should allow the Gold price to reclaim the $2,700 round figure. The subsequent move up could extend further towards the monthly swing high, around the $2,726 zone, above which the XAU/USD is likely to resume its upward trajectory.

On the flip side, the overnight swing low, around the $2,633 region, now seems to protect the immediate downside ahead of the monthly trough, around the $2,614 zone. This is closely followed by the $2,600 mark, which if broken decisively will be seen as a fresh trigger for bearish traders and make the Gold price vulnerable to resume its recent sharp pullback from over a one-month peak touched last week.