Spot gold is holding within a tight range ahead of week’s key event – Fed rate decision that is expected to influence metal’s near-term outlook.
The US Federal Reserve is widely expected to raise interest rates by 0.75% for the second time, following June’s 75 basis points hike, in attempts to put raging inflation under control, but also trying to avoid triggering a recession.
Gold price would hold ground or slide on 0.75% hike, as higher interest rates make the dollar more attractive, however investors focus on Fed Chair Powell’s comments in the press conference following the rate decision, to get more clues about the central bank’s steps in the near future.
This will be crucial for metal’s short term direction, as hawkish signals would inflate dollar and increase pressure on gold that would result in renewed attempt through psychological $1700 support and retest of key Fibo support at $1681 (38.2% retracement of larger $1046/$2074 uptrend) cracked on July 21.
On the other side, Fed turned its focus fully on inflation and any signs that inflation is peaking, would soften the central bank’s tone about the future actions that would turn overall stance dovish and offer fresh support to the bullion.
Initial support lays at $1710 (daily Tenkan-sen) followed by pivots at $1700 (psychological) and $1681 (Fibo), clear break of which would risk drop towards $1600 (psychological) and $1560/44 (50% of $1046/$2074 / monthly cloud top).
On the other side, acceleration through pivotal barriers at $1756 (Fibo 38.2% of $1879/$1680) and $1764 (daily Kijun-sen) would sideline downside risk and shift near-term focus to the upside.
Res: 1739; 1756; 1764; 1786.
Sup: 1710; 1700; 1681; 1658.