Gold prices are moving within previous ranges as investors await Fed decision

• Gold prices consolidate losses as investors wait for the Fed.
• Strong employment and sticky inflation have cooled hopes of a Fed pivot.
• XAU/USD is hovering right above an important support area.

Gold prices (XAU/USD) remain practically flat for the second consecutive day on Wednesday. The precious metal is consolidating losses, with investors reluctant to take positions ahead of the Federal Reserve's (Fed) monetary policy decision, due later today.

Tuesday’s United States (US) Consumer Price Index (CPI) data showed an unexpected increment in prices in November. The yearly inflation eased to 3.1% from 3.2% and the core CPI, which removes the impact of seasonal assets like food and energy, remained steady at 4%.

These figures show the serious challenge ahead for the Fed to run the last mile on inflation, which coupled with the strong employment data seen last Friday cast serious doubts about the chances of rate cuts in March.

In this context, the US Dollar remains steady and Gold prices remain below the psychological $2,000 level as we head into the all-important Fed decision. 

The US central bank is widely expected to leave its benchmark interest rate on hold at the 5.25%-5.5% band. Traders will be attentive to the interest rate projections, the so-called dot plot, and Fed Chairman Jerome Powell press conference for clues on the next monetary policy steps. 

Daily Digest Market Movers: Gold loses momentum as hopes of imminent Fed cuts fade

• Gold is practically flat with investors awaiting the outcome of the Federal Reserve’s meeting for more clues on the bank’s monetary policy outlook.
   
• US Producer Prices remained flat in November, and grew at a 0.9% pace year-on-year, falling short of market expectations of 0.2% and 0.9% increases respectively. This has triggered a moderate negative impact on the USD.
   
• Tuesday’s data showed an unexpected increase in US consumer inflation in November, which has cooled expectations of a Fed pivot in the first quarter of 2024. 
   
• US Consumer Price Index (CPI) edged up 0.1% in November, against market expectations of a flat performance, while year-on-year the CPI eased to 3.1% from 3.2% in October.
   
• The core CPI inflation, which excludes volatile food and energy prices, met expectations and remained steady at 4.0% year-on-year.
   
• November’s inflation, coupled with the strong employment seen on Friday, reveals that the Fed faces a serious challenge to bring the CPI down to the 2% target.
   
• In this scenario, investors are holding their breath ahead of the Federal Reserve’s monetary policy decision, due later on Wednesday.
   
• The Fed is widely expected to leave its benchmark rate at the current 5.25 -5.5% band. The main attraction of the event will be the interest-rate projections and Chairman Powell’s comments at the press conference.
   
• In China, a meeting of top leaders has failed to deliver any significant economic stimulus measures, which has disappointed investors, dampening the market mood. 

Technical Analysis: Gold prices hover above an important support area at $1,970

Technical indicators show a bearish picture for Gold, with bulls capped well below the $2,000 psychological level and support at the $1,970-$1,980 under increasing pressure.

Price action has broken below the main Simple Moving Averages (SMAs) in the 4-hour charts, and an impending bearish cross between the 50 and 200 SMAs is giving fresh hopes for bears.

Bullion trades now right above $1,980, where the neckline of a head and shoulders (H&S) pattern meets the 50% Fibonacci retracement of the October - December rally.

A confirmation below here would increase bearish pressure towards the mid-November lows and 61.8% Fibonacci retracement of the above-mentioned bull run, at the $1,935 area, ahead of $1,838, and the measured target of the H&S pattern at $1,851.

On the contrary, a bullish reversal from current levels is likely to meet resistance at the $2,000 psychological level, which closes the path toward $2,035 and $2,075.