Gold price is trading lower a day ahead of the FOMC decision as traders start to align their positions to match the expectations of yet another rate hike by the US Federal Reserve. With the markets expecting a 75bps rate hike on Wednesday, long-term bond yields remain elevated, keeping gold prices close to 2-year lows.
There is an outside possibility of a 100 basis points print by the Fed, but this has been priced in with a 20% probability on Fed Funds futures. This would see the non-yielding metal trading much lower, and there could be more volatility brought on by the Fed Chair’s comments later on.
Jerome Powell, who heads the Federal Open Market Committee (FOMC) of the US Federal Reserve, could touch on the future pathway for interest rates, with only two more meetings to go after 21 September’s decision. Long-term bond yields have been on the uptick since breaking the 12 August top at 2.904%.
This Tuesday, the US 10-year Treasury Note rose 2.38%, adding to Monday’s 1.19% gain and drawing investment flows from gold and into USD-denominated money market instruments. Gold price on the XAU/USD asset is down 0.67% as of writing after US data for Tuesday came in mixed.
The rejection at the 1679 resistance (21 July 2022 low now acting in role reversal) and subsequent breach of the 5 June 2020 low clears the pathway toward the 1643 support level. This previous 9 April 2020 low forms the only barrier between the current price and attainment of the 8 January 2020 high at 1612. A fresh low at 1593 (31 January 2020 low) becomes available if the bulls fail to defend the 1612 support.
On the flip side, a break of the 1679 resistance is required to clear the path toward the 1696 resistance level (2/14 September lows). If the bulls uncap this barrier, the 1716 price mark becomes the next target. 1739 and 1753 are additional harvest points that become viable if the advance continues.
This post was last modified on Sep 22, 2022, 13:31 BST 13:31