XAU/USD Fights Under $1850, Attention on FOMC

Gold had a bad time trading on Wednesday and dipped further below the highest point it has achieved in November 2021, about $1,854. The XAU/USD trading pair maintained a low status throughout the initial stage of the European session and it was contending with the daily low point of $1,845.

Market Shaking

The latest dwindle may be associated with market re-strategizing over the major central bank’s major event, awaiting the result of the Federal Open Market Committee meeting. It should be recalled that the stock market was completely priced out in a Federal Reserve lift-off in March 2021, though up to four rate increases are expected this year.

Investors are therefore looking out for indicators of when the Federal Reserve will begin its policy restrictions. This will determine the next direction for investors in the non-yielding gold market.

Meanwhile, the rising US Treasury bond yields and the expected earlier monetary policy implementation by the Federal Reserve continue to be in the shadow of the dollar in the market. It was this condition that caused the decline in the dollar-determined gold trade. Besides, the heavy recovery of global risk sentiments, characterized by a widespread optimism in the equity market, diverted financial flow from the precious metal.

The current drawback, nevertheless, seems to have been taken care of within concerns over the political situation between Russia and Ukraine.

In recent developments over the Eastern European standoff, The US has ordered about 8,500 troops to be on alert and ready for deployment to Ukraine in the event that an armed confrontation ensued between Ukraine and Russia. Whereas, President Biden has announced that he is considering sanctions on the person of President Putin of Russia, when in the same vein, the British Prime Minister, Boris Johnson, has asked fellow Europeans to get sanctions in place against Russia should they invade Ukraine.

These moves may stop traders from carrying out heavy pushes, and help reduce the loss of gold.

Technical Point of View

Technical analysts say that the appearance of investors buying the dip around the $1,830 resistance zone provides support possibilities for more near-term profits. Therefore, a successive drive towards trying a declining line spreading from June 2021 increase, presently around the $1,860 zone, remains possible.

A clear trade breakthrough will be received as a new impetus for buoyant traders, and it will make new ways for extending the latest increase observed in the last month.