XAU/USD extends backslide, markets gear up for Fed rate call

• XAU/USD continues decline that started last Friday, sheds $2,000.
• Markets are coiling up in preparation for another round of US inflation, Fed rate call.
• Fed interest rate forecast ‘dot plot’ to drive market momentum into the midweek.

Spot Gold saw further declines on Monday, slipping back below the $2,000 handle to ease into the $1,980 neighborhood as markets get set for a fresh round of US Consumer Price Index (CPI) inflation figures on Tuesday. Wednesday will follow up with a mid-week showing from the Federal Reserve (Fed) for the US central bank’s last rate call of 2023.

Forex Today: Quiet markets ahead of US CPI and the Fed; Gold extends slide

US CPI inflation is expected to mix on the front end of the curve, with Core CPI (headline inflation less volatile food and energy prices) is expected to jump from 0.2% to 0.3% MoM in November, while the YoY figure is forecast to tick down slightly from 3.2% to 3.1%. Markets have coalesced into a mass of rate cut expectations from the Fed, but inflation continues to print well above the 2% upper bound of the Fed’s Core CPI target range.

See more: Forecasts from 10 major banks, crushing rate cut prospects

Wednesday will follow up with the Fed’s latest Monetary Policy Statement and Interest Rate Projections, slated to release side-by-side at 19:00 GMT. Market participants seeking an accelerated path to Fed rate cuts will be diving into the Fed’s Dot Plot, looking for signs the central bank is getting pushed towards rate cuts that investors are broadly hoping for in the first half of 2024.

The Fed’s press conference slated for half an hour after the rate statement and dot plot releases at 19:30 GMT is set to draw significant market attention for the midweek trading hump.

XAU/USD Technical Outlook

Gold’s Monday decline extends the XAU/USD’s slip from the 200-hour Simple Moving Average (SMA) last Friday, shedding the $2,000 major price handle to test back into the $1,980 level. Spot Gold is now down seven and a half percent  from last week’s early rally just beyond $2,140, and near-term consolidation has etched in a technical sticking area near $2,030.

Daily candlesticks have been propped up on the bullish side of the 200-day SMA since bouncing from the key moving average in November near $1,940, and near-term declines are setting the XAU/USD up for a pullback to the 50-day SMA that has confirmed a bullish cross of the 200-day SMA.

Further declines into $1,960 could set up bulls for a rebound into recent highs, though market reactions to the mid-week economic calendar releases will introduce plenty of froth, rattling technical setups.

XAU/USD Hourly Chart

XAU/USD Daily Chart

XAU/USD Technical Levels