FX.co ★ MMC | XAU/USD, GOLD

Gold (XAU/USD) sees its recovery efforts stall on Wednesday, ahead of the Fed's monetary policy decision at 18:00 GMT. Falling Oil prices helped support gold prices off their weakest level since July in the last two sessions. However, rising Oil prices, along with a stable USD, are weighing on further gains. XAU/USD was trading around $4,046 at the time of writing, down 0.36% on the day. The USD Index (DXY), which measures the Greenback's performance against a basket of other major currencies, is flat at around 102.40, near two-week highs. Oil prices bounce as the Wall Street Journal said that the White House warned the Gulf countries of the potential military strike on Iran after the US midterm elections. West Texas Intermediate (WTI) traded around $100.50 per barrel, up 1.0% on the day. Rising energy prices have fueled inflation since the outbreak of the war in the Middle East at the end of February, prompting tight monetary policy from key central banks, especially the Federal Reserve. The US central bank raised interest rates by 25 basis points in September and added another 25 bps before year-end, reiterating its intent to bring inflation back to its 2% target. As expected, policymakers will keep interest rates at 3.75%-4.00% at the upcoming October meeting, while the CME FedWatch Tool shows an 85% likelihood of a rate hike in December. According to analysts at ABN Amro, US economic data developments allow the Fed to pause for now. According to analysts, "along with the recent softness in PCE figures, the labour data take away much of the pressure to raise rates right away," allowing policymakers to "have another six weeks to see if the recent strength in inflation is just another blip." In their opinion, "the combination of high risk of near-term inflation and weakening labor market calls for patience but not complacency." Thus, ABN Amro believes the Fed "will keep rates steady in October, make a final 25bps hike in December and leave them unchanged for a prolonged period of time." Since a pause is already widely expected, guidance on the future course of monetary policy can cause a stronger market reaction than the actual decision. If the guidance signals possible future rate increases, the US Dollar will gain, and the $4,000 support level for Gold will be threatened because holding a non-yielding asset becomes more costly. On the daily chart, XAU/USD carries a bearish short-term outlook as it trades below its 50-day, 100-day and 200-day SMAs, keeping sellers in charge. The RSI of 40 suggests weak buying strength, while the MACD remains negative, implying the downward trend continues. The first upside resistance level is the 100-day SMA at $4,219, with the 50-day SMA at $4,288 above. In a more bullish scenario, horizontal resistance at $4,400 will become relevant, followed by the 200-day SMA at $4,503. On the downside, price could find support in the $4,000-$3,950 area. A lower breakout could lead to a deeper retracement. At the same time, any bullish rallies will continue to struggle as long as XAU/USD trades below its clustered daily moving averages.