Gold (XAU/USD) trades with a mild negative bias below the $4,300 mark heading into the European session on Tuesday and remains close to an over one-month low, which it touched the previous day. The downside, however, remains cushioned as traders opt to move to the sidelines ahead of the crucial two-day FOMC policy meeting, starting later today.
The US Federal Reserve (Fed) is scheduled to announce its decision on Wednesday, and the latest US inflation figures, released last week, lifted bets for an imminent interest rate hike. The focus, however, will be on updated economic projections, including the so-called dot plot, and Fed Chair Kevin Warsh's comments during the post-meeting press conference. Investors will look for more cues about the Fed's future policy path, which will play a key role in influencing the US Dollar (USD) price dynamics and provide a fresh directional impetus to the non-yielding Gold.
Heading into the key central bank event, inflation risks stemming from higher energy prices underpin prospects for further Fed policy tightening. Adding to this, a surge in public and corporate borrowing contributed to an extended global bond selloff. This, in turn, lifted the yield on the benchmark 10-year US Treasury bond above the 5% threshold for the first time since 2023. Adding to this, persistent geopolitical uncertainties keep the safe-haven USD close to a nearly two-week high, touched on Monday, and should cap any further gains for Gold.
In the latest developments surrounding the Middle East crisis, Iran-backed Houthis in Yemen carried out a large-scale missile and drone attack on a Saudi air base in Khamis Mushait on Monday. Moreover, Iranian Supreme National Security Council Secretary Mohsen Rezaei rejected the prospect of immediate negotiations with the US, saying that Tehran will not return to talks until its conditions are met. This dampens hopes for a diplomatic solution to end the war, favoring USD bulls and warranting caution before positioning for any further upside for the Gold price.
XAU/USD daily chart
Technical Analysis
The XAU/USD pair holds a slight neutral-to-capped tone as it sits just under the 50.0% retracement level of the June-August upswing, while still trading above the 50-day Simple Moving Average (SMA), suggesting consolidation rather than a clear trend. Moreover, the Relative Strength Index (RSI) hovers around 45, hinting at subdued momentum. However, the Moving Average Convergence Divergence (MACD) remains in negative territory with a depressed histogram, reinforcing the idea that rallies may struggle unless buyers reclaim overhead Fibonacci resistance.
Meanwhile, a move above the 50.0% retracement around $4,323 could face a strong barrier at the 38.2% Fibo. retracement near $4,412 and then the 23.6% level close to $4,522 if upside pressure builds. On the downside, immediate support is provided by the 50-day SMA at about $4,275, ahead of the 61.8% Fibo. retracement around $4,234. A convincing break below this zone would expose the deeper structural supports at the 78.6% retracement near $4,108 and the prior anchor area around $3,947.
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