FOMC Decision: Gold (XAU/USD) fell to around $3,680 per ounce on Wednesday, likely on profit-taking after the metal notched a fresh record in the previous session and tested the $3,700 milestone.
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- The Federal Reserve is expected to cut the benchmark rate by 25 bps on Wednesday.
- Upbeat United States data was not enough to rescue the US Dollar.
- Gold (XAU/USD) consolidates near $3,700, bulls pause ahead of Federal Reserve’s announcement.
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FOMC Decision
Nevertheless, the broader upward bias remained intact as markets awaited the Federal Reserve’s policy decision, with the central bank widely expected to deliver a 25bps rate cut—the first reduction of the year.
Softer payroll data highlighted a weakening labor market, reinforcing expectations for multiple cuts, with markets now pricing in three reductions this year.
Still, the economy shows pockets of resilience, as August retail sales rose 0.6%, while the core control group climbed 0.7%, marking a fourth straight month of growth.
Investors will also watch the Fed’s new dot plot and Chair Jerome Powell’s press conference for further guidance.
Meanwhile, gold has surged about 41% year-to-date, supported by strong central bank demand, safe-haven inflows, and a shift away from the weakening US dollar.
Gold short-term technical outlook
From a technical point of view, the daily chart for the XAU/USD pair is showing modest signs of upward exhaustion. Technical indicators are losing their upward strength in extreme overbought territory, with the Relative Strength Index (RSI) indicator at around 81. Furthermore, the pair is far above all its moving averages, with a bullish 20 Simple Moving Average (SMA) at around $3,516, over $200 above the longer ones.
In the near term, and according to the 4-hour chart, the XAU/USD pair has room to extend its advance. A mildly bullish 20 SMA provides support at around $3,657, while the 100 and 200 SMAs accelerated north far below the shorter one. At the same time, the Momentum indicator resumed its advance within positive levels, while the RSI indicator seesaws directionless at around 70.