- Gold gets a respite, bolstered by increasing tensions between Russia-Ukraine.
- The US Dollar Index hits a two-decade high above 111.000, the highest since 2007.
- Gold Price Analysis: Downward biased, despite jumping from weekly lows, boosted by Putin’s commentary.
Gold price snaps two days of consecutive losses and climbs, despite broad US dollar strength, courtesy of increasing tensions between Ukraine-Russia. Therefore, investors seeking safety bolstered the yellow metal. At the time of writing, XAU/USD is trading at $1667.70 a troy ounce, above its opening price.
US equities are slightly up, ahead of the Fed’s decision. US Treasury bond yields are retreating from their YTD highs, augmenting the appetite for precious metals, after newswires reported that Russian President Vladimir Putin is preparing to deploy 300K additional troops towards “defending” the regions of Donbas and Luhansk.
Aside from this, traders are laser-focused on the Fed’s decision. The US central bank is widely expected to raise rates by 75 bps, though there’s a slim 18% chance of going for 100 bps. Alongside the monetary policy decision, Fed officials would update the Summary of Economic Projections (SEP), which would shed some light regarding US growth, unemployment rate, and inflation measures.
Additionally, in the so-called “dot-plot,” the eighteen policymakers delineate the Federal funds rate (FFR) for the foreseeable future. Most economists are expecting a hawkish tilt towards finishing 2022 at around the 3.75-4% range and, by 2023, to move towards the 4-4.50% area.
In the meantime, the US Dollar Index, a gauge of the buck’s value vs. a basket of peers, is trading at two-decade-highs at around 111.000, up by 0.73%, breaching for the first time the 111.000 mark. Contrarily, US T-bond yields are getting a respite, with the US 10-year bond yield almost flat at 3.561%.
Of late, as reported by Reuters, the US 2-year Treasury bond yield surpassed the 4% threshold for the first time since 2007, displaying expectations of an aggressive Fed.
Data wise, the US economic docket featured Existing Home Sales for August, dropping 0.4% less than estimates of a 2.29% contraction expected, and also better than July’s 5.9% fall. Analysts cited by Reuters commented, “High prices and Fed rate hikes will likely remain constraints for sales going forward.”
What to watch
Later, the US economic docket will feature the US Federal Reserve monetary policy decision at 18:00 GMT, followed by Chair Jerome Powell’s press conference at 18:30 GMT.
Gold Price Analysis (XAU/USD): Technical outlook
From a technical analysis perspective, XAU/USD daily chart illustrates the pair as downward biased. However, it should be noted that as price action reached lower lows, the Relative Strength Index (RSI) did the opposite. This means that a positive divergence might be forming. However, gold’s early gains are mainly attributed to Putin’s commentary, meaning that once the Fed’s decision crosses newswires, the noise would dissipate, giving a clear look of the yellow metal price action.
Resistance levels lie at the weekly high at $1679.51, followed by July 21 low at $1681, and then the $1700 mark. On the flip side, the XAU/USD first support would be the weekly low at $1659, followed by the YTD low at $1654, and then a fall towards $1600.