Gold Holds at a Critical Zone, FOMC to Determine the Next Direction

Gold prices remained cautious in today’s trading, with XAU/USD hovering around US$4,300 per troy ounce ahead of the Federal Reserve’s interest-rate decision. Fundamentally, gold remains under pressure from expectations that the Fed will raise interest rates by 25 basis points, with markets pricing in a probability of more than 90%.

The US 10-year Treasury yield, which briefly climbed above 5%, and the Dollar Index holding around the 99.60 area are also limiting gold’s upside potential. A stronger US dollar and elevated yields make interest-bearing assets more attractive, creating a negative backdrop for non-yielding gold.

On the other hand, geopolitical tensions in the Middle East and persistently high oil prices are providing limited support for gold as a safe-haven asset. However, higher oil prices also increase inflation risks, which could strengthen the case for the Fed to maintain a tighter monetary policy stance. This leaves the geopolitical impact on gold somewhat mixed.

From a technical perspective, gold retains a bearish-to-neutral bias as long as prices fail to hold firmly above the US$4,300 area. The next resistance zone is seen around US$4,328-US$4,350. A sustained break above this area could open the way for a broader rebound toward US$4,400.

Meanwhile, the US$4,275 area remains an important short-term support level. A break below this level could expose gold to further pressure toward US$4,250-US$4,253, near its lowest level in more than a month. If selling pressure continues and US$4,250 fails to hold, gold could extend its decline toward the US$4,200 area.

Overall, gold’s direction today will largely depend on the FOMC decision and comments from Fed Chair Kevin Warsh. A rate hike accompanied by hawkish guidance could push the US dollar and Treasury yields higher and weigh further on gold. In contrast, a 25-basis-point hike combined with more dovish guidance could trigger a rebound. The US$4,275-US$4,300 zone remains a key area to watch before the market establishes its next direction. (mrv)

Source: Newsmaker.id