XAUUSD had been rejected at the $1,650 level and is under pressure ahead of the latest Federal Reserve interest rate meeting.
The US central bank is widely expected to hike interest rates again by 75 bps at their meeting on Wednesday. Still, stock markets are rallying on the expectation that the FOMC policy setters will hold back on any further aggressive policy action after the end of the year.
GOLD – Weekly Chart
Gold prices were previously looking at the $1,700 level for critical support. Still, after a recent rally, the precious metal has slumped again. The gold market obviously doesn’t trust the stock market rally or vice versa.
The Federal Reserve has been under pressure from global central banks and finance ministers recently as the soaring dollar added to inflation in those countries.
The Fed may stand still in December to appease the global economy, but it may not mean the end of inflation.
Jake Jolly, a senior strategist at BNY Mellon, said:
“What’s going to be most critical is how much Powell tells us about December. If Chair Powell is relatively quiet and doesn’t want to discuss his thinking, that could be hawkish. That means it will remain a very data-dependent decision. Markets like certainty; they don’t like ‘wait and see”.
There was also criticism closer to home, with US Senate Banking Committee Sherrod Brown saying:
“It is your job to combat inflation, but at the same time, you must not lose sight of your responsibility to ensure that we have full employment. We must avoid having our short-term advances and strong labour market overwhelmed by the consequences of aggressive monetary actions to decrease inflation, especially when the Fed’s actions do not address its main drivers.”
Markets are looking for a huge sigh of relief from the Federal Reserve. Any move on Wednesday and beyond may be temporary in the bigger picture.
The price of gold looks at support below, but that only appears at the $1,550 level. Traders should be on guard for a Jerome Powell statement that may take the steam out of the recent stock rally and push gold higher, but should expect volatility.