Gold Backs Away From Yearly Highs With Fed In the Spotlight
2023.03.21 15:11
Gold prices continued to pull back on Tuesday as market sentiment improved as investors brace for the Federal Reserve decision on Wednesday.
At the time of writing, the spot price, , is trading at $1,940 an ounce, nearly 2% below its opening price, having lost around $70 or 3.5% from its one-year high of $2,009 scored on Monday.
The retreat in gold prices has been mainly driven by soaring U.S. Treasury yields amid some relief among investors regarding the banking crisis. The 10-year note yield has risen 10 bps to 3.583% after striking multi-month lows the previous day.
The Federal Reserve two-day meeting concludes on Wednesday. After the recent developments in the banking sector, investors now speculate the FOMC will take a more cautious approach when it comes to rising rates. The CME FedWatch Tool shows an 80% probability of a 25 bps hike and 20% of a no-hike decision, while a 50 bps increase looks out of the picture, but Powell and fellow policymakers could still catch markets by surprise.
From a technical perspective, the XAU/USD holds a positive bias as indicators hold into positive ground on the daily chart despite the last sessions’ price pullback.
Immediate support is seen at the $1,895 area, former support and 61.8% retracement of the $2,070-$1,615 decline, followed by the 20-day SMA at $1,870. Loss of the latter could deteriorate the technical setup. On the flip side, the short-term key resistance area is $1,990-$2,010. A break above this level would expose 2022 highs at the $2,070 zone.
