Gold awaits the crucial Fed decision for some meaningful directional impetus

• Gold price struggles to gain any meaningful traction and hangs near a one-week low.
• Hawkish Fed expectations underpin the USD and act as a headwind for the metal.
• Traders seem reluctant to place aggressive bets ahead of the crucial FOMC decision.

Gold price (XAU/USD) extends its sideways consolidative price move through the early European session on Wednesday and oscillates in a range just above a one-week low touched on Monday. The robust US consumer and producer inflation figures released last week fuelled speculation that the Federal Reserve (Fed) may delay rate cuts. The hawkish outlook, meanwhile, remains supportive of elevated US Treasury bond yields, which underpins the US Dollar (USD) and acts as a headwind for the non-yielding yellow metal.

Apart from this, the underlying strong bullish sentiment surrounding the global equity markets further seems to undermine demand for the safe-haven Gold price. Bearish traders, however, seem reluctant to place aggressive bets amid persistent geopolitical risks and ahead of the highly-anticipated FOMC monetary policy decision. Investors will look for cues about the Fed’s rate-cut path, which will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the precious metal. 

Daily Digest Market Movers: Gold price remains on the defensive as traders keenly await the crucial Fed decision

• The stronger US inflation figures released last week forced investors to trim their bets for an interest rate cut in June and remain supportive of elevated US Treasury bond yields, underpinning the US Dollar and capping the Gold price. 
• The current market pricing indicates a less than 50% likelihood that the Fed will deliver its first interest-rate cut in June, and the central bank’s 2024 median interest-rate projection could shift to two cuts from three cuts previously.
• The yield on the benchmark 10-year US government bond climbed to its highest level since November 30, pushing the USD to a two-week high and contributing to keeping a lid on any meaningful upside for the non-yielding yellow metal. 
• Wall Street closed Tuesday’s trading session on a high note Tuesday, with the S&P 500 rising to a fresh record high and holding back bulls from placing bets around the safe-haven commodity despite the ongoing geopolitical tensions.
• Traders, however, opt to wait for the outcome of the highly anticipated two-day FOMC monetary policy meeting for cues about the future rate-cut path before positioning for the next leg of a directional move for the XAU/USD. 
• The US central bank is widely expected to keep rates at their historic highs, though the market focus will be on the “dot plot” for clues about the number and timing of rate cuts this year, which will influence the precious metal. 
• Adding to this, Fed Chair Jerome Powell’s comments during the post-meeting press conference might infuse some volatility in the financial markets and provide some meaningful impetus to the Gold price. 

Technical Analysis: Gold price bulls not ready to give up, $2,145 support holds the key ahead of the FOMC

Against the backdrop of the recent blowout rally to the record peak, the pullback witnessed over the past week or so along a downward-sloping channel, constitutes the formation of a bullish flag pattern. Furthermore, technical indicators on the daily chart have eased from the overbought territory and are still holding comfortably in the positive zone. This, in turn, validates the constructive setup and suggests that the path of least resistance for the Gold price is to the upside. 

That said, it will be prudent to wait for a sustained breakout through the descending channel before positioning for any further appreciating move. The Gold price might then accelerate the positive move to the $2,175-2,176 intermediate hurdle en route to the record peak, around the $2,195 area touched last week. Some follow-through buying beyond the $2,200 mark will set the stage for the resumption of the uptrend witnessed since the beginning of this month.

On the flip side, the $2,145-2,144 now seems to have emerged as an immediate strong support, which should act as a pivotal point for the Gold price. A convincing break below will expose the next relevant support near the $2,128-2,127 zone before the XAU/USD extends the corrective decline further towards the $2,100 round figure.