Gold Treads Water Ahead of a Cascade of Central Bank Hikes. Where to for XAU/USD？

Gold, XAU/USD, US Dollar, FOMC, DXY Index, ECB, BoE, Crude Oil - Talking Points

Gold had a look lower at the US$ 1,900 handle in the US session but quickly recovered back above US$ 1,925. At the same time, the DXY Index, a benchmark measure of the US Dollar, moved to higher ground before collapsing into the New York close.

Wall Street had a stellar session on hopes that the Fed Chair Jerome Powell might soften the hawkish stance at todays Federal Open Market Committee (FOMC) meeting.

Prior to the media blackout, several committee members had been sprouting the message that 25 basis points seemed like the appropriate dosage for tightening and that rates will need to remain high for ‘a long period’.

Interest rate markets have a 25 bp lift baked in. It is the post-meeting commentary that has the potential to set off market moves.

In addition, the European Central Bank (ECB) and the Bank of England (BoE) will be meeting tomorrow, and the market expects both banks to tighten by 50 bp.

Treasury yields slipped a few bps overnight but have done very little through the Asian session today.

The Nasdaq posted a 1.67% gain in its cash session, but futures are indicating a soft start to their day trading.

APAC equities have had a quiet day, although most indices are slightly positive. Likewise, currency markets are lying in wait to see what comes of the Fed meeting, although the Swiss Franc posted solid gains yesterday.

After testing lower levels yesterday, crude oil has held onto the consequent recovery. The WTI futures contract is above US$ 79 bbl while the Brent contract is around US$ 85.80 bbl at the time of going to print.

After the European CPI number, the US will see figures on mortgage applications, employment and the ISM survey. The Fed remains the focus late in the day.

The full economic calendar can be viewed here.

GOLD TECHNICAL ANALYSIS

Gold has dipped below the 10-day simple moving averages (SMA), but remains above all other short, medium and long-term daily SMAs.

This may suggest a pause in short-term bullish momentum, but that underlying medium and long-term bullish momentum remains intact for now. The price remains in an ascending trend channel.

Resistance might be at the recent peak of 1949 or the April 2022 high of 1998.

On the downside, support may lie at the lows of 1900 and 1897 or the breakpoints of 1865 and 1825.