Gold bulls went into hiding on Wednesday as investors awaited the outcome of the Federal Reserve meeting this evening. It has been a choppy week for the commodity so far with price down almost 0.2% since Monday. When looking at gold, it remains the same old story with bulls and bears engaged in a tough tug of war. As highlighted yesterday, there is no doubt that the next few days will be eventful with its near-term outlook impacted by the looming Fed meeting.
Markets widely expect the Fed to leave interest rates unchanged in January. However, investors will closely scrutinise the meeting for fresh insight into the Fed’s aggressive monetary policy path for 2022. Should Fed hawks dominate the scene, this could hit buying sentiment towards gold with prices sinking back towards $1810 and $1800 in the short term. A strong daily close below the psychological $1800 level could open the doors towards$1786.
If the Fed shows any hesitancy in future rate hikes, this could rekindle appetite for zero-yielding gold, pushing prices back towards $1845 and $1870.
Looking beyond today, the road ahead for gold remains rocky and filled with many obstacles. 2022 is already shaping up to be a rough and uncertain year for the metal thanks to Fed hike expectations and a stronger dollar. If Treasury yields continue to rise, this may compound to gold’s woes, paving the way for steeper declines. It may be wise to keep a close eye on the weekly timeframe. Prices still remain in a very wide range while the MACD is flat. Bulls look slightly exhuasted with a bearish pin bar in the making. Should prices end the week below $1831, this could signal a decline back towards the $1786 level and $1750, respectively.