Gold Flat As Markets Wait For Outcome Of Fed Meeting And Ukraine Talks

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Gold prices were flat on Wednesday as investors refrained from making big bets ahead of the Federal Reserve’s rate hike decision. The bullion remained near the two-week trough hit in the previous session. Market participants are also waiting for updates on the ongoing peace talks between Russia and Ukraine.

The Fed is expected to announce its first interest rate hike in three years. That expectation pushed U.S. Treasury yields to more than a two-and-a-half-year high, which dented the demand for the yellow metal.

Spot gold is currently trading at $1,913.10 per ounce as of 0830 GMT.

Stephen Innes of SPI Asset Management commented that the markets are starting to reflect development in the Ukraine situation. He said gold would lose its main anchor if the peace talks continue. But high inflation and a moderate rate increase would still be good for the metal, he suggested. Also, markets have fully priced in seven rate hikes for 2022.

On the technical front, Reuters technical analyst Wang Tao predicted spot gold to climb to the $1,941-$1,960 range.

DailyFX strategist Daniel McCarthy added that the market rejected the gold rally after the bullion failed to breach the all-time high of $2,075 an ounce. He also mentioned that crossing below the 10- and 21-day simple moving averages confirmed the loss of bullish momentum. McCarthy sees resistance at the pivot point or $1,974.40 or the previous highs of $2,075.14 and $2,070.42. On the downside, support could be at the pivot point of $1,877.15 or 1864.67 and 1837.06.

FXStreet senior analyst Dhwani Mehta argued that gold’s fate hinges on the outcome of the Federal Reserve’s meeting. However, she believes that concerns about the Ukraine crisis, soaring inflation, and economic growth remain in play. The daily price charts indicate more challenges for gold after this week’s sell-off. She noted that bullion price closed below two key support levels of the rising trendline on Tuesday. And the breakout leaves floors open for more weakness. Mehta also pointed out that the 14-day Relative Strength Index is trading beneath the midline, indicating more downside risks.

Michael Boutros, another DailyFX strategist, agreed that the gold washout is at the mercy of the Fed decision. Though the gold washout may be nearing an end, he advised traders to be on the lookout for an exhaustion low. A larger washout could offer more favorable opportunities closer to uptrend support, he explained. Boutros also predicted some volatility as the markets reprice the Fed’s updated economic projections.

In a related development, the holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, dropped by 0.2% to 1,061.8 tons on Tuesday.