- Gold gets a breather, bolstered by rising tensions between Russia and Ukraine.
- The Dollar Index hits a two-decade high above 111.00, the highest level since 2007.
- Gold Price Analysis: Bearish bias, despite jumping off weekly lows, fueled by Putin’s comments.
The price of gold breaks two days of consecutive losses and rises, despite the broad strength of the US dollar, courtesy of the growing tensions between Ukraine and Russia. Therefore, investors looking for safety strengthened the yellow metal. At the time of writing, XAU/USD is trading at $1667.70 a troy ounce, above its opening price.
US stocks are up slightly, awaiting the Fed’s decision. US Treasury yields are retreating from their all-time highs, increasing appetite for precious metals, after media reports reported that Russian President Vladimir Putin is preparing to deploy an additional 300,000 troops to “defend” the Donbas and Luhansk regions.
Apart from this, traders are focused on the Fed’s decision. The US central bank is expected to raise rates by 75 basis points, although there is a slight 18% chance it will reach 100 basis points. . Along with the monetary policy decision, Fed officials will update the Summary Economic Projections (SEP), which will shed some light on US growth, the unemployment rate and inflation measures.
Also, in a so-called “dot-plot” or graph of points, the eighteen monetary policy makers plot the federal funds rate (FFR) for the foreseeable future. Most economists expect a hawkish tilt to end 2022 around the 3.75%-4% range and, by 2023, closer to the 4-4.50% zone.
Meanwhile, the Dollar Index, a gauge of the dollar’s value against a basket of peers, is trading at a two-decade high of around 111.00, up 0.73%, breaking above the 111.00 mark for the first time. . By contrast, US bond yields are taking a breather, with the 10-year yield almost flat at 3.561%.
Lately, as reported by Reuters, the US 2-year Treasury yield has broken the 4% threshold for the first time since 2007, signaling expectations of an aggressive Fed.
As for the data, the US economic docket included August Existing Home Sales, which fell 0.4% less than estimates of a 2.29% contraction expected, and also better than the 5.9% drop in July. Analysts quoted by Reuters commented: “High prices and Fed rate hikes will likely continue to limit selling going forward.”
where is the focus
Later, the US economic docket will feature the US Federal Reserve’s monetary policy decision at 18:00 GMT, followed by Chairman Jerome Powell’s press conference at 18:30 GMT. .
Gold Price Analysis (XAU/USD): Technical Outlook
From a technical analysis point of view, the daily chart of XAU/USD shows that the pair has a bearish bias. However, it is noteworthy that as price action reached lower lows, the Relative Strength Index (RSI) did the opposite. This means that a positive divergence could be forming. However, gold’s early gains are mostly attributed to Putin’s comments, meaning that once the Fed’s decision is released, the noise would dissipate, giving a clear view of the yellow metal’s price action.
Resistance levels come in at the weekly high of $1,679.51, followed by the July 21 low of $1,681, and then the $1,700 signal. On the other hand, the first support for XAU/USD would be the weekly low at $1,659, followed by last year’s low at $1,654, and then a drop to $1,600.
Source: Fx Street
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