After three consecutive weeks of gains, the Gold Spot Price (XAUUSD) has traded flat this week as market participants wait for Wednesday’s highly anticipated U.S. Fed Interest Rate Decision.
The spot price retreated from its month’s high following the release of better-than-expected U.S. unemployment data, which pointed to a highly resilient labour market. In addition, the market priced in a 98.9% chance of the Fed hiking rates tomorrow, which supported the Greenback at the expense of the yellow metal.
The spot price entered an uptrend after crossing above the 100-day moving average and taking flight as the Greenback faltered in recent weeks. A reversal from the 1987.41 level established a resistance which formed July’s high, while support at the 1945.74 level was formed as the spot price surged higher with conviction.
The spot price has since retraced past the 61.80% Fibonacci Retracement Golden Ratio following the rejection of the resistance level. It now trades sideways on low volumes in oversold Relative Strength Index Territory.
Given that the Federal Reserve is likely to hike interest rates by 25 basis points, the key driver of the spot price will probably be the stance the central bank takes in its Fed Press Conference. If the Fed strikes a hawkish tone, the spot price could falter on the possibility of the market favouring the higher yielding potential of the Greenback, making the 1945.74 level a likely point of interest to the downside. In contrast, if the Fed exudes a dovish stance, the yellow metal could find favour in its safe haven capacity, likely leaving the upside probable, with the 1987.41 level the most likely level of significance to the upside.
The outcome of the Fed’s interest rate decision and the Fed’s press conference this week will probably have the biggest impact on the price of gold. The 1945.74 level is likely if the Fed continues to advocate higher rates in its fight against inflation. Alternately, upward price action could be influenced by the Fed’s dovish positioning, making the 1987.41 level more feasible.
Sources: CME, Reuters, TradingView
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