XAU/USD Holds Slight Advances At $1,780 Prior To FOMC Meeting

After briefly gaining ground in the early European session, the XAU/USD duo lost its footing and fell toward $1,770 per ounce. Nevertheless, with markets remaining pretty hopeful in front of the Federal Open Market Committee’s financial policy statements, the greenback found it hard to find demand, allowing Gold to rise slightly. As of right now, a humble daily boost of about $1,780 has been maintained by the pair. The US Dollar Index, which detects the currency’s output against a bundle of six main peers, is currently down a few basis points at 93.13, mirroring the USD’s unimpressive results. The Federal Reserve is broadly expected to leave its policy interest rate unaffected, but investors will be paying close attention to the amended Overview of Forecasts and Chairman Jerome Powell’s press briefing to find out why.

The second day of rejection around the 200-hour simple moving average (SMA) hampered Gold’s ability to consolidate on its small intraday advances to the $1,780 area. As evidenced by the largely positive tone surrounding the asset prices, the risk-on instinct was considered to be an important factor contributing to the valuable metal’s depreciation as a safe-haven asset class. Evergrande Group, China’s ailing estate behemoth, announced it will cover the bond interest amount on Thursday, putting an end to worries of a sudden business failure. The Chinese central bank also pumped funds into the banking sector, which helped to raise the overall risk mood throughout the world.

North American Session

The decline continued throughout the early North American session, dragging the Gold price back closer to the $1,770 mark in the last hour of trading. Although there is some concern about the potential downside, traders are keeping their fingers crossed as they await the result of a two-day FOMC meeting for hints regarding the tapering schedule.  Fed Chair Jerome Powell will give a media briefing in which the most recent economic predictions will be discussed in further detail. Appetite for the non-yielding precious metal would be dented if any hawkish indications were sent out, resulting in aggressive selling.

As a result, so far, the US dollar has been unable to gain any significant ground and has been trapped in a tight trading range below one-month highs reached earlier this week. This was considered to be yet another reason that may provide some assistance to dollar-denominated assets, such as Gold, in the future. As a result, it will be advisable to hold off on preparing for the continuation of the recent sharp drop from the $1,832-34 support area until there has been some follow-through trading.

Technical Prognosis

XAU/USD CHART. Source: Tradingview.com

From a technical standpoint, the 200-hour simple moving average (SMA), which is around the $1,778-80 zone, appears to be acting as a critical point for short-term investors. With further momentum, bulls ought to be able to regain the $1,800 level and try to test the 200-day simple moving average (SMA), which is now located around the $1,806 zone.

However, the zone between $1,766 and $1,766.65 is expected to function as immediate support, and if it is breached, Gold could become exposed. After that, the XAU/USD is expected to further propel its decline towards the $1,730-29 horizontal support zone, which is on its way to the $1,700 round number. The next significant support is located at the $1,754-52 area.

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