- Gold price extends a three-day losing streak on the Fed decision day.
- US Dollar holds recovery alongside US Treasury bond yields amid the market caution.
- Gold price appears a ‘buy on dips’ trade, as daily technical setup still favors buyers.
Gold price is on its corrective decline for the third consecutive early on Wednesday, having failed once again to resist above the $2,000 mark. A typical pre-Federal Reserve (Fed) decision caution prevails across the financial markets, keeping the buoyant tone intact around the safe-haven United States Dollar (USD).
US jobs data, US Treasury announcement and Fed verdict in focus
The US Dollar is consolidating its overnight recovery gains, piggybacking the action in the US Treasury bond yields, amid a negative shift in risk sentiment. An unexpected contraction in the Chinese Caixin Manufacturing PMI in October combined with jittery markets ahead of the key US employment data and the Fed interest rate decision dents risk appetite, as the Asian markets ditch the positive close on Wall Street overnight.
Investors also weigh a grim global forecast from the World Bank amidst the ongoing war between Israel and Hamas and its impact on Oil prices. In light of these factors, the US Dollar remains the preferred go-to safe-haven asset so far this Wednesday’s trading, leaving Gold price languishing In multi-day lows near $1,980.
Additionally, Gold price bears the brunt of the renewed upswing in the US Treasury bond yields across the curve, with the benchmark 10-year US Treasury bond yields reverting toward the 5.0% level. The US bond market rout seems to have resumed ahead of Wednesday’s critical announcement on refunding by the US Treasury, including details about the size of Treasury auctions and the duration mix of the debt that will be issued. On Monday, the US Treasury said it will be auctioning off $776 billion of debt in the final quarter of 2023.
That said, the main event risk remains the US Federal Reserve interest rate decision, with a pause fully baked in. Therefore, Fed Chair Jerome Powell’s words on the future interest rate path and on the economic and inflation outlook will hold the key for a fresh lift in the US Dollar. Markets are expecting the Fed to leave the door open for one more rate hike amid a resilient US economy, tight labor market conditions and elevated inflation level.
Besides, the US ADP Employment Change, JOLTs Job Openings report and the ISM Manufacturing PMI data will be also closely scrutinized by Gold traders for a fresh trading impetus. Fresh developments surrounding the Gaza-Israel conflict will also play a pivotal role, influencing the market sentiment and the Gold price action.
Gold price received much-needed support on Monday, in the wake of the World Gold Council (WGC) report, which showed central banks bought 800 tonnes in the first nine months of the year, up 14% YoY. Of that, 181 tonnes were bought by China. However, the Gold price rally soon faded, as the US Dollar jumped back on the bid alongside the US Treasury bond yields, despite a risk-on environment in American trading.
Gold price technical analysis: Daily chart
The short-term technical outlook for Gold price remains in favor of buyers, with a ‘dip-buying’ strategy to hold ahead of the Fed decision.
The 14-day Relative Strength Index (RSI) indicator has retreated from the overbought territory, reopening doors for more upside.
Further supporting the bullish view, the 21-day Simple Moving Average (SMA) and 50-day SMA Bull Cross remains in play while the 21-day SMA has also cut the 100-day SMA for the upside.
Therefore, additional declines are likely to find strong static support at $1,963, below which a test of the $1,950 psychological level cannot be ruled out.
On the other hand, if Gold buyers fight back control, immediate resistance is enviosned at the $1,990 round level, above which the $2,000 threshold will be retested.
Acceptance above the multi-month high of $2,009 is ciritcal to reviving the uptrend toward the mid-May high near $2,020.
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