Gold prices barely moved on Wednesday despite the decline in the U.S. dollar. Investors avoided making big moves before the Federal Reserve announced its interest rate decision. That decision could have a significant impact on the price movement of the bullion. The market expects the Fed to raise interest rates by 75 basis points (bps) which would bring the total rate hikes since March to 225 bps. Meanwhile, the benchmark U.S. 10-year Treasury yields firmed and limited gold’s upside potential.
Spot gold is currently trading at $1,718.59 per ounce as of 0701 GMT.
Meanwhile, the U.S. consumer confidence index fell 2.7 points to 85.7 in July. It was the lowest level in almost 18 months. The Conference Board survey showed that consumers are sharply assessing their spending plans due to concerns about higher inflation and rising interest rates.
Michael Langford, the executive director of AirGuide, noted that the 75-bp rate hike is already priced in. It means the Fed announcement could push the bullion either up or down depending on the degree of short covering. However, he expects gold prices to remain under pressure since rate hikes are likely to continue for the next three months. The bullion could drop below $1,700 per ounce.
On the technical front, DailyFX strategist Michael Boutros commented that gold prices rebounded off confluent downtrend support. In this context, he advised traders to watch for downside exhaustion ahead of the yearly low-close at $1,696. Market participants should also expect volatility after the Fed rate hike announcement. Boutros also mentioned that the IG Client Sentiment index shows a gold-bearish contrarian trading bias.
FXStreet analyst Sagar Dua noted that gold prices are moving back and forth in the $4 range ahead of the central bank’s decision. The hourly price chart shows that the bullion is again auctioning in a descending triangle pattern. The downward-sloping trendline is at $1,739.37 while the horizontal support is at $1,712.94. Dua also said that gold prices overlap with the 20-day Exponential Moving Average, which indicates potential consolidation. Also, the 14-day Relative Strength Index is hovering in the 40.00-60.00 range, which suggests that gold is waiting for a trigger to make its next move.