Gold Moves Narrowly, FOMC and Global Central Banks Set to Trigger Volatility
Gold prices (XAU/USD) continued to move sideways around the psychological level of US$5,000 heading into Wednesday's European session, as market participants held positions ahead of the FOMC decision. The Fed is expected to hold interest rates, so market attention will be focused on the policy statement, the latest economic projections, including the dot plot, and comments by Fed Chairman Jerome Powell, which could potentially provide new direction for the dollar and gold.
Gold's safe-haven support remains strong as the Iran war shows no signs of abating. The US-Israeli attack and the effective closure of the Strait of Hormuz disrupted energy trade and kept inflation risks high. This situation has led the market to trim expectations for interest rate cuts in 2026, with pricing shifting from multiple cuts to the possibility of just one cut in December. This repricing of interest rates helped the dollar halt its two-day decline and is a major factor restraining gold's gains, as gold offers no yield.
However, geopolitical uncertainty limits gold's downside room. Iran confirmed that top security official Ali Larijani and Basij Forces chief Gholamreza Soleimani were killed in an Israeli strike, while the US military reportedly targeted locations along the Iranian coast near Hormuz. Iranian statements also emphasized that the response would be "decisive," keeping the risk of escalation high and maintaining hedging demand.
Looking ahead, gold's movement is highly dependent on the direction of the dollar and yields post-FOMC. In addition to the Fed, the market is also awaiting policy updates from the ECB, Bank of Japan, and Bank of England later in the week, which could increase volatility across assets. Under these conditions, gold tends to remain "locked in" until the market has more certainty: whether energy inflation forces interest rates to remain tighter for longer, or whether central banks continue to view the energy shock as a temporary factor.
What market participants need to watch:
Dot plot and Powell's tone: Hawkish sentiment tends to support the USD and hold back gold.
Oil prices and Hormuz headlines: determinants of energy inflation risk.
US Treasury yields: falling support gold, rising hold back gold.
ECB/BoJ/BoE meeting results: could alter risk sentiment and dollar movements. (CP)
Source: Newsmaker.id
