Gold price extends its consolidative price move near multi-week low, FOMC decision awaited

• Gold price is seen consolidating its recent losses to a three-week trough.
• Reduced bets for a March Fed rate cut cap the upside for the XAU/USD.
• Traders also seem reluctant ahead of the crucial FOMC policy decision.

Gold price (XAU/USD) remains on the defensive during the Asian session on Wednesday and currently trades around the $1,978 region, just above its lowest level since November 20 touched earlier this week. The latest consumer inflation figures released from the United States (US) on Tuesday further dampened the prospects for an early policy easing by the Federal Reserve (Fed). Apart from this, the prevalent risk-on environment, further bolstered by hopes for more stimulus measures from China, is seen as a key factor acting as a headwind for the safe-haven precious metal. 

That said, geopolitical risks, along with growing acceptance that the Fed will start easing its monetary policy by the first half of 2024, act as a tailwind for the non-yielding Gold price. Furthermore, the uncertainty over the timing of when the US central bank may begin cutting interest rates keeps the US Dollar (USD) bulls on the defensive, which might further contribute to limiting the downside for the commodity. Traders might also refrain from placing aggressive directional bets and prefer to wait for the outcome of the highly-anticipated two-day FOMC monetary policy meeting.

The Fed is scheduled to announce its decision later during the US session and is expected to maintain the status quo. The market focus, meanwhile, remains glued to the accompanying monetary policy statement and updated economic projections, which include the so-called “dot plot”. This will be followed by Fed Chair Jerome Powell’s post-meeting press conference, which will be scrutinized closely for confirmation of a change in the central bank’s policy stance. The markets are currently pricing in the possibility of at least four 25 basis point (bps) rate cuts by the Fed in 2024. Hence, a dovish pivot will exert heavy pressure on the US Dollar (USD) and trigger a fresh leg up for the non-yielding Gold price.

Daily Digest Market Movers: Gold price struggles to attract any buyers,  looks to Fed for fresh impetus

• The uncertainty over the Federal Reserve’s near-term policy outlook holds back traders from placing directional bets around the Gold price and leads to subdued range-bound price action.
• Data released from the United States on Tuesday showed that consumer prices rose unexpectedly in November, forcing traders to further scale back bets for a rate cut in March.
• The US Labor Department reported that the headline Consumer Price Index (CPI) edged up 0.1% in November and the yearly rate ticked down to 3.1% from the 3.2% previous.
• The annual Core CPI inflation, which excludes volatile food and energy prices, held steady at 4.0% as forecast and rose 0.1% on a monthly basis, little changed from the previous month.
• The November numbers were still well above the Fed’s 2% target and come on top of the stronger-than-expected US jobs report last Friday, pointing to a still resilient economy.
• The market focus remains glued to the outcome of the crucial two-day FOMC monetary policy meeting, scheduled to be announced later during the US session this Wednesday.
• Investors will look for fresh cues about the timing of when the Fed may start cutting rates in 2024, which, in turn, will drive the US Dollar demand and influence the yellow metal.
• Hopes for more stimulus from policymakers in China overshadow the risk of a further escalation of geopolitical tensions in the Middle East and remain supportive of the risk-on mood.
• Reporting on the annual Central Economic Work Conference that ended on Tuesday, state media said that China will step up policy adjustments to support economic recovery in 2024.
• Yemen’s Iran-backed Houthi rebels issue regulations for navigating through the Red Sea amid the Israel embargo and the warning includes a restriction on travel towards “Occupied Palestinian territories”.
• This, however, does little to temper investors’ appetite for perceived riskier assets or dampen the underlying bullish market sentiment and benefit the safe-haven precious metal.

Technical Analysis: Gold price remains on the defensive, bears flirts with 50% Fibo. support

From a technical perspective, the Gold price, so far, has managed to defend the 50% Fibonacci retracement level of the October-December rally to an all-time peak. This is closely followed by the 50-day Simple Moving Average (SMA), currently around the $1,969-1,968 region, below which the XAU/USD could slide to test the very important 200-day SMA, near the $1,953-1,952 area. The next relevant support is pegged near the $1,942-1,938 confluence, comprising the 100-day SMA and the 61.8% Fibo. level, which should act as a key pivot point. A convincing break below the latter will be seen as a fresh trigger for bearish traders and pave the way for a deeper corrective slide.

On the flip side, any meaningful recovery attempt might continue to attract some sellers near the $2,000 psychological mark and remain capped near the $2,010-2,012 static resistance. Some follow-through buying has the potential to lift the Gold price further towards the $2,030 hurdle en route to the $2,040 supply zone. The subsequent move-up will shift the near-term bias in favour of bullish traders against the backdrop of the occurrence of a golden cross, with the 50-day rising above the 200-day SMA. The XAU/USD might then climb to the $2,071-2,072 region before aiming to reclaim the $2,100 round figure.