Gold price retreats by 0.67% on Wednesday as the Federal Reserve holds rates unchanged, amid a 10-to-2 vote split, which triggered no movement in the yellow metal. This, along with the US-Iran conflict, weighs on bullion prices. The XAU/USD trades at $4,039 at the time of writing.
XAU/USD remains under pressure as a divided Fed pauses tightening while energy prices fuel inflation concerns
On Wednesday, the Fed held rates at 3.75%-4% with two dissenters, Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack, who voted for a 25 basis points rate hike
The Fed acknowledged that economic activity is expanding, domestic spending “has been resilient, that productivity growth is strong and that capital investment is robust,” and productivity growth is strong. Regarding its employment mandate, the Fed noted that “Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
On inflation, the central bank said it remains elevated but chose to hold off on rate hikes while gathering more information and assessing the appropriate policy stance.
The focus is on the Fed’s Chair Warsh press conference, who will need to answer questions of why not raise rates today, when West Texas Intermediate (WTI), the US Oil benchmark, is above $103 per barrel, up more than 3%, and gasoline prices are $1.20 higher than a year ago at $4.24, according to AAA Fuel Prices.
Along with this, traders would look for hints that Warsh might provide about the future of interest rates – even though he doesn’t like to forward-guide the markets.
Tensions between the Houthis and Saudi Arabia remain high, following an attack by the Iran-backed group in Yemen on a Saudi refinery, which pushed energy prices higher on concerns of supply disruptions.
After the Fed’s meeting, Gold traders will also eye the release of the Core Personal Consumption Expenditures (PCE) Price Index – the Fed’s preferred inflation measure – on Thursday. A hot reading on this and strong Gross Domestic Product (GDP) figures will cement the case for another rate hike at the December meeting.
The swaps market had priced in 21 basis points of tightening, or an 85% chance that the Fed will hike in the December meeting, according to Prime Terminal.
Meanwhile, higher interest rates are negative for Gold prices, despite its appeal as an inflation hedge.
Of note, analysts polled by Reuters downward-revised their forecasts for Gold towards the end of 2026.
XAU/USD technical analysis: Gold consolidates within $4,000-$4,100
Even though Gold formed a ‘bullish harami’ candle pattern, price action on Wednesday puts in doubt the validity of the pattern. If the candle closes the day near current prices, it could open the door to some consolidation.
Momentum has shifted negatively. The Relative Strength Index (RSI) is bearish, pointing downwards, aligned with price action. Given the mixed signals, price action will remain at around familiar levels until the Fed’s decision.
On the upside, the next area of interest is a resistance trendline drawn from the September highs near $4,100. A breach of this level will expose $4,200. The next key resistance levels are the 100-day Simple Moving Average (SMA) at $4,218 and the 50-day SMA at $4,278.
If XAU/USD falls below $4,000, it could test last Friday’s low of $3,975. The next key support levels are the July 17 low of $3,959 and the year-to-date (YTD) low of $3,941.
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