Further advances depend on the Fed

XAU/USD Current price:  $1,776.53

  • A better market mood put pressure on the American currency.
  • The US Federal Reserve will announce its monetary policy decision on Wednesday.
  • Gold advanced for a second day in a row, but additional gains are at doubt.

Gold prices advanced for a second consecutive day, trimming half of the previous week losses. The bright metal benefited from decreased demand for the American currency amid a better market mood that also pushed global equities into positive territory, although Wall Street is still far from making up Monday’s losses.

Investors moved away from the greenback as fears receded and as the US Federal Reserve kick-started its two-day meeting on monetary policy. The central bank will announce its decision with fresh economic projections on Wednesday, and some market participants still expect hints on tapering. The possible timeline is critical as if policymakers decide to start trimming its stimulus program before year-end, XAU/USD could take a turn for the worse.

Gold price short-term technical outlook

Spot gold hit a daily high of $1,781.75 a troy ounce, currently trading at around 1,775. XAU/USD stands above the 61.8% retracement of the March/June rally, the immediate support level at 1,769.10. The daily chart shows that the pair remains below all of its moving averages, with the 20 SMA heading south below the longer ones and around the next Fibonacci level. Meanwhile, technical indicators have recovered but remain within negative levels, indicating limited buying interest.

In the near term, and according to the 4-hour chart, the risk is skewed to the upside, although the bullish potential is limited. The metal has advanced beyond its 20 SMA, which now turned flat, but remains below the 100 and 200 SMAs, which maintain their bearish slopes. The Momentum indicator turned flat after crossing into positive territory, offering a neutral stance, while the RSI indicator advances at around 56. Bulls will have better chances if gold surpasses 1,785.40, the immediate resistance level.

Support levels: 1,769.10 1,754.20 1,742.00

Resistance levels: 1,785.40 1,796.90 1,806.70

View Live Chart for the XAU/USD

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