Gold Price Struggles for Firm Intraday Direction Ahead of Fed Decision
The gold price (XAU/USD) consolidated within a tight range around the $2,570 mark on Wednesday as the financial markets await significant central bank event risks. Traders have been cautious, opting to remain on the sidelines until the outcome of the Federal Reserve’s (Fed) pivotal two-day Federal Open Market Committee (FOMC) meeting is announced. This hesitation comes amid speculation about potential monetary easing, as well as geopolitical concerns that are influencing market sentiment.
Consolidation Ahead of Key Fed Decision
The consolidation phase around $2,570 reflects the broader market’s apprehension as traders await the FOMC decision. The Fed is expected to announce its interest rate policy, which will significantly impact market direction. With rising expectations of a policy easing from the Fed, the US Dollar’s (USD) recovery from a multi-month low has been limited, which is providing some support for gold, a non-yielding asset.
Impact of Policy-Easing Bets on Gold
There is growing speculation that the Fed may adopt a more aggressive policy easing stance, possibly announcing a 50-basis point cut in interest rates. According to the CME Group’s FedWatch Tool, markets are pricing in a 65% probability of such a cut, which is helping to underpin gold prices. A policy easing would generally weaken the USD, making gold more attractive to investors.
Traders’ Reluctance to Make Aggressive Moves
Despite these factors, traders hesitate to place aggressive bets ahead of the FOMC decision. This reluctance is also being driven by geopolitical uncertainties, including potential escalations in the Middle East and political instability in the United States ahead of the upcoming presidential election. As a result, many traders prefer to wait for clear signals before positioning for a more pronounced move in the gold price.
Geopolitical and Economic Factors Supporting Gold
While the gold price faces immediate resistance at the all-time high of $2,589-$2,590, other factors are providing a tailwind for the yellow metal.
Geopolitical Risks in the Middle East
Rising geopolitical tensions in the Middle East, notably in Lebanon and North Korea, have contributed to gold’s safe-haven appeal. A recent incident involving simultaneous explosions in Lebanon, reportedly involving Hezbollah members, has increased the risk of broader regional conflict. Such geopolitical risks typically drive investors toward safe-haven assets like gold.
US Political Uncertainty
Adding to this, uncertainty around the upcoming US presidential election is also lending support to the gold price. As political uncertainty increases, investors tend to move away from riskier assets, boosting demand for gold.
Key Central Bank Decisions This Week
In addition to the Fed’s decision, investors are closely watching the upcoming monetary policy decisions from the Bank of England (BoE) and the Bank of Japan (BoJ). Both announcements, scheduled for later this week, will be important in shaping market sentiment toward gold.
Daily Digest Market Movers: Awaiting the Fed Decision
The market is now finely balanced, awaiting key developments that could shift sentiment. Let’s take a closer look at the major market movers influencing gold price action:
Fed Policy Easing Speculation
The growing expectation that the Fed will announce a 50-basis point cut has kept the gold price supported. While the gold price experienced a modest pullback overnight, this dip could attract fresh buying interest, especially if the Fed signals a dovish outlook.
US Retail Sales Data and Its Limited Impact
The US Census Bureau’s release of retail sales data for August revealed a modest increase of 0.1%, which was better than the expected decline. This data helped the USD recover slightly, though the positive move was short-lived due to ongoing expectations of Fed easing.
Global Geopolitical Tensions
Rising tensions in the Middle East, particularly the recent explosions in Lebanon and North Korea’s missile tests, have contributed to market jitters. These risks are helping to sustain demand for safe-haven assets like gold.
Technical Outlook: Path of Least Resistance Remains Upward
From a technical analysis perspective, the gold price remains in an uptrend, but bulls are awaiting a decisive move above the $2,589-$2,590 resistance zone to trigger fresh buying.
Key Resistance Levels
A break above this zone would clear the path for gold to test the $2,600 mark, with the next resistance level located near the top boundary of a short-term ascending channel. This channel extends from the sub-$2,400 levels seen in late June, with the top boundary pegged around the $2,609-$2,610 region. A decisive break above this zone could signal a continuation of the uptrend, possibly targeting new highs.
Downside Risks and Support Levels
On the downside, the $2,561-$2,560 area represents a key near-term support zone. A breach of this level could open the door to deeper losses, with the next major support found around the $2,530-$2,525 level, which coincides with a strong horizontal resistance zone. Further declines below this level could attract fresh buyers around the psychological $2,500 mark, which is a critical pivot point.
If this support level is breached decisively, it could signal a more significant correction, with the next support zone located around the $2,475-$2,470 confluence, comprising the 50-day Simple Moving Average (SMA) and the lower boundary of the current trend channel.
Outlook: What’s Next for Gold?
The gold market is poised for a breakout in either direction, with the FOMC decision expected to provide the catalyst. A dovish Fed would likely support the gold price, pushing it higher toward new record levels. On the other hand, any signs of a more hawkish stance from the Fed could trigger a pullback.
Other Influences to Watch
Beyond the Fed, other central bank decisions, such as those from the BoE and BoJ, could also influence gold’s trajectory. Additionally, continued geopolitical tensions and US political uncertainty will likely sustain demand for gold as a safe-haven asset.
In the meantime, traders are likely to continue exercising caution, waiting for a clearer picture before making more aggressive moves. The technical setup, however, suggests that the path of least resistance remains to the upside.
