Gold's advance appears to be losing momentum ahead of policy meetings at the US Federal Reserve, the European Central Bank, and the Bank of Japan, boosting the possibility that the rebound this month may be a corrective one. The US Federal Reserve is largely expected to raise interest rates by 25 basis points one last time …
Gold’s advance appears to be losing momentum ahead of policy meetings at the US Federal Reserve, the European Central Bank, and the Bank of Japan, boosting the possibility that the rebound this month may be a corrective one.
The US Federal Reserve is largely expected to raise interest rates by 25 basis points one last time on Wednesday, but the accompanying statement will be heavily scrutinized. A hawkish move might boost the US dollar globally while weighing on gold. A more data-dependent / ‘wait-and-see’ approach might return USD and gold to their current ranges, whilst a dovish hike could put downward pressure on USD, benefiting XAU/USD.
In terms of the anticipated move’s sensitivity, if previous USD performance is any indication, a dovish hike by the Fed could weigh on USD more than the other two scenarios.
XAUUSD 4-Hour Chart
The European Central Bank is also expected to hike its key interest rate by 25 basis points on Thursday and to remain hawkish. However, recent remarks from ECB officials indicating a rate hike in September is not a foregone conclusion raise the possibility of a dovish hike. Meanwhile, during its meeting on Friday, the Bank of Japan is anticipated to maintain its ultra-easy monetary policy.
XAUUSD Daily Chart
On technical charts, as mentioned in the last report, XAU/USD has met the price target of the minor reverse head and shoulders pattern from about 1980, which was started earlier this month. However, the yellow metal appears to be collapsing near the early-June high of 1983, which is just below the upper boundary of the Ichimoku cloud on the daily charts.
If the recent bounce from the end of June is to continue, XAU/USD must remain above convergent support, which includes the mid-July low of 1945 and the 200-period moving average on the 4 hour charts.
Keynotes:
The rally in gold prices is losing momentum ahead of policy meetings by the US Federal Reserve, the European Central Bank, and the Bank of Japan.
The outcome of the Fed’s interest rate hike and accompanying statement will influence the US dollar and gold. A hawkish hike could support the dollar and weigh on gold, while a dovish hike could weaken the dollar and benefit gold.
The ECB is expected to raise rates, but comments suggesting a September hike may not happen introduce the risk of a dovish hike. The Bank of Japan is likely to maintain its easy monetary policy.
Risk disclaimer:
Please note that this article does not offer any instructions or suggestions regarding investment decisions. It is important for you to conduct your own research or seek professional advice from a qualified professional before conducting an investment decision.
