Gold Hits $4,350 Ahead of Fed Decision
XAU/USD rises 1.30% as the dollar steadies and Treasury yields pull back. The market awaits a widely expected 25 basis point rate hike.
Gold prices rose 1.30 percent to trade near $4,350 per ounce on Wednesday. This rebound followed a drop to a one-month low earlier in the week. Traders reduced bearish positions ahead of the Federal Reserve monetary policy announcement. The US Dollar Index held near two-week highs at 99.65. The 10-year US Treasury yield declined slightly to 4.99 percent after hitting 5.04 percent on Tuesday. The dollar remained stable despite the move in bond yields.
The Federal Reserve is expected to deliver its first rate hike since July 2023. Markets price in a 25 basis point increase to a target range of 3.75 percent to 4.00 percent. The decision is scheduled for 18:00 GMT, followed by a press conference. The hike reflects inflation risks from the Middle East conflict. Oil prices remain elevated, complicating the return to the 2 percent inflation target. The US labor market remains stable after strong August employment data.
Fed decision drives market expectations
ING strategists expect a consensus 25 basis point move. They note that markets are pricing in 23 basis points for today. The cumulative tightening is projected at 52 basis points by year-end. A surprise hold would likely weaken the US Dollar significantly. This would occur through dovish repricing of front-end rates. A hawkish message is considered necessary to satisfy bond investors. Higher borrowing costs typically reduce the appeal of non-yielding assets like gold.
The metal’s reaction will depend on the updated Summary of Economic Projections. The dot plot and post-meeting remarks are critical factors. A signal of further rate increases could weigh on gold prices. Avoiding a commitment to another hike could support the recovery. The quarter-point increase is almost fully priced in by traders. The focus shifts to the qualitative tone of the central bank communication.
Technical levels define gold range
XAU/USD remains in a mid-range configuration on the daily chart. Price holds above the 50-day and 100-day Simple Moving Averages. The 200-day SMA at $4,540 acts as a significant ceiling. The Relative Strength Index stands at 48, indicating flat momentum. The MACD histogram remains in negative territory. This suggests upside attempts may struggle while the 200-day SMA remains overhead. The technical setup implies a neutral to capped bias.
Initial support is located at the 100-day SMA near $4,326. The 50-day SMA provides further support around $4,280. More robust demand is expected at $4,150 if selling pressure accelerates. The next major support level sits at $4,000. The first significant resistance is the 200-day SMA at $4,540. A break above this barrier would signal a shift in the broader trend. According to GN auto markets/commodities: gold prices, the current setup keeps traders cautious. The metal remains sensitive to macroeconomic data releases.
