Gold prices are trading with a mild positive bias on Tuesday, trying to stage a recovery from a multi-week low in the vicinity of the $3,300 region after fresh safe-haven interest was stirred up by geopolitical tensions and uncertainty before the FOMC policy decision. Although optimism around trade and continued US-China negotiations provides some respite, the potential upside continues to be capped by a stronger US Dollar as it is sustained by expectations of the Federal Reserve keeping interest rates elevated for an extended period. Investors are waiting and want to see important cues from the Fed statement and Chair Powell’s speech that will define the short-term trajectory of the XAU/USD pair.

KEY LOOKOUTS

• The Fed interest rate move and Chair Powell’s speech this week are awaited by markets for leads on the rate path ahead, which may trigger significant gold moves.

• The USD is solid in expectations of extended higher interest rates, serving as a significant headwind to gold’s potential upside.

• Concerns over the Russia-Ukraine crisis and US-China trade talks continue to underpin safe-haven demand for gold.

• Important resistance is at $3,340 and $3,367, with the possibility of further decline to the $3,260 support area on a break below $3,300.

Gold prices are exhibiting minor gains above the $3,300 mark as investors anticipate Wednesday’s pivotal FOMC policy announcement. While the metal is supported by safe-haven demand in the face of geopolitical uncertainties and trade tensions, its bullishness is capped by the ongoing strength of the US Dollar underpinned by expectations of extending higher interest rates. Investors are holding back and awaiting direction from the Federal Reserve on future monetary policy, as well as keeping an eye on US economic indicators and world risk appetite for short-term guidance.

Gold prices trade with marginal gains above $3,300 on amid cautious market sentiment before the FOMC announcement. The strong US Dollar and expectations of interest rate hikes limit the upside, and safe-haven demand provides limited support.

• Gold price trades with a mild positive bias above the $3,300 level, bouncing back from a multi-week low.

• Safe-haven demand finds support for gold amidst continued geopolitical tensions and global trade news.

• The US Dollar continues to be solid, capping the potential for gold higher on expectations of sustained higher interest rates.

• Traders are hesitant prior to the FOMC rate decision, anticipating no rate move but wanting clues on subsequent policy.

• Technical resistance is around $3,340–$3,368, and key support is at $3,260–$3,255, just near the 100-day SMA.

• Optimism over US-China and US-EU trade fills in a positive note, but insufficient to fuel aggressive gold buying.

• Future US economic releases (JOLTS, Consumer Confidence) can potentially drive near-term USD action and affect gold prices.

Gold prices are holding firm above the $3,300 threshold as investor attention is turned to this week’s pivotal FOMC policy announcement. With the Federal Reserve strongly anticipated to hold interest rates steady, market players are eagerly awaiting any indication of potential future rate actions that may influence larger financial market directions. The risk-averse sentiment among traders is an indicator of skepticism regarding the policy direction of the US central bank, particularly in the face of sticky inflation and pockets of economic strength. Meanwhile, gold keeps gaining modestly from its safe-haven demand as investors respond to global geopolitical events.

XAU/USD DAILY PRICE CHART

SOURCE: TradingView

Compounding market mood is also a new wave of trade-related optimism following recent US agreements with the EU and Japan. In addition, pre-scheduled negotiations between US and Chinese top leaders indicate continued attempts to contain economic tensions between the world’s largest two economies. At the same time, geopolitical tensions related to Russia and Ukraine, especially in the wake of the US President’s fresh deadline and warning on sanctions, maintain global risk sentiment nervous. All these factors together provide a conservative but bull market environment for gold, despite the US Dollar remaining steadfast.

TECHNICAL ANALYSIS

Gold is finding it hard to pierce the near resistance area of $3,340–$3,368, which has thwarted recent attempts at recovery. The persistent inability to hold above this point indicates the establishment of a possible multiple top pattern on the daily chart. Further, momentum indicators have begun to reflect bearish divergence, indicating waning bullish bias. If prices slide beneath the $3,300 psychological level, then it may lead to further losses towards the $3,260–$3,255 support area, which coincides with the 100-day Simple Moving Average (SMA) and may act as a decisive pivot area for the next move.

FORECAST

If gold is able to hold above the $3,300 mark and break over the nearest resistance of $3,340, then it may lead to a short-covering rally. A break decisively above the $3,368 level can potentially pave the way for a further upward move to the psychological $3,400 level. Sustained strength here could drive prices towards the $3,434–$3,435 area, with scope to test the all-time high in the vicinity of $3,500 if positive sentiment gains more momentum, particularly on back of dovish Fed hints or escalating geopolitical tensions.

On the negative side, inability to maintain the $3,300 support level may confirm the bearish bias and intensify declines towards the $3,260–$3,255 area, a crucial region demarcated by the 100-day SMA. Sinking below this area may trigger further selling pressure, potentially pushing gold prices down towards the $3,230 level or even $3,200 in the near future. Continuing USD strength or a more hawkish Fed tone may further dampen the metal and intensify the corrective move.