Image Source: Pixabay

• Gold price struggles to gain any meaningful traction and hangs near one-week low.
• Hawkish Fed expectations underpin the USD and act as a headwind for the metal.
• Traders seem reluctant to place aggressive bets ahead of the crucial FOMC decision.

Gold price (XAU/USD) extends its sideways consolidative price move during the Asian session on Wednesday as traders opt to wait for the outcome of the highly anticipated FOMC monetary policy meeting. Heading into the key central bank event risk, growing acceptance that the Federal Reserve (Fed) will stick to its higher-for-longer interest rates narrative amid sticky inflation lifts the US Dollar (USD) to a two-week high. This, along with the prevalent risk-on environment, turns out to be another factor acting as a headwind for the safe-haven precious metal. 

The downside for the Gold price, however, remains cushioned in the wake of geopolitical risks stemming from the protracted Russia-Ukraine war and conflicts in the Middle East. Investors also seem reluctant and await more cues about the Fed's rate-cut path before placing fresh directional bets. Hence, the focus will remain on updated economic projections, which, along with Fed Chair Jerome Powell's comments at the post-meeting press conference, will play a key role in determining the next leg of a directional move for the non-yielding yellow metal.  

Daily Digest Market Movers: Gold price remains confined in a range as traders await Fed rate-cut cues

• The stronger US inflation figures released last week forced investors to trim their bets for an interest rate cut in June and remain supportive of elevated US Treasury bond yields, underpinning the US Dollar and capping the Gold price. 
• The current market pricing indicates a less than 50% likelihood that the Fed will deliver its first interest-rate cut in June, and the central bank's 2024 median interest-rate projection could shift to two cuts from three cuts previously.
• The yield on the benchmark 10-year US government bond climbed to its highest level since November 30, pushing the USD to a two-week high and contributing to keeping a lid on any meaningful upside for the non-yielding yellow metal. 
• Wall Street closed Tuesday's trading session on a high note Tuesday, with the S&P 500 rising to a fresh record high and holding back bulls from placing bets around the safe-haven commodity despite the ongoing geopolitical tensions.
• Traders, however, opt to wait for the outcome of the highly anticipated two-day FOMC monetary policy meeting for cues about the future rate-cut path before positioning for the next leg of a directional move for the XAU/USD. 
• The US central bank is widely expected to keep rates at their historic highs, though the market focus will be on the "dot plot" for clues about the number and timing of rate cuts this year, which will influence the precious metal. 
• Adding to this, Fed Chair Jerome Powell's comments during the post-meeting press conference might infuse some volatility in the financial markets and provide some meaningful impetus to the Gold price. 

Technical Analysis: Gold price bulls need to wait for a breakout through a descending channel

Against the backdrop of the recent blowout rally to the record peak, the pullback witnessed over the past week or so along a downward-sloping channel, constitutes the formation of a bullish flag pattern. Furthermore, technical indicators on the daily chart have eased from the overbought territory and are still holding comfortably in the positive zone. This, in turn, validates the constructive setup and suggests that the path of least resistance for the Gold price is to the upside. 

That said, it will be prudent to wait for a sustained breakout through the descending channel before positioning for any further appreciating move. The Gold price might then accelerate the positive move to the $2,175-2,176 intermediate hurdle en route to the record peak, around the $2,195 area touched last week. Some follow-through buying beyond the $2,200 mark will set the stage for the resumption of the uptrend witnessed since the beginning of this month.

On the flip side, the $2,145-2,144 now seems to have emerged as an immediate strong support, which should act as a pivotal point for the Gold price. A convincing break below will expose the next relevant support near the $2,128-2,127 zone before the XAU/USD extends the corrective decline further towards the $2,100 round figure.

More By This Author:

U.S. Dollar Gains Momentum On Strong Housing Data, Eyes On FOMC
AUD/JPY Struggles To Lure Buyers, Remains Below 98.00 Mark After RBA/BoJ Announcements
USD/JPY Coils Just Above 149.00 Ahead Of BoJ, Fed Action