Gold Price Nears 2,645; FOMC and Federal Reserve’s Policy Decision Looms

Gold prices experienced a modest increase on Wednesday as investors turned their attention to the Federal Reserve’s forthcoming monetary policy announcement.

The central bank is widely expected to implement its third interest rate cut of the year, with markets assigning a 97.1% probability to a 25 basis point reduction.

Market Awaits Federal Reserve’s Policy Decision

The Federal Open Market Committee (FOMC) commenced its two-day meeting on Tuesday, with a policy decision anticipated on Wednesday. Investors are particularly focused on the Fed’s updated economic projections and the “dot plot,” which could influence expectations for the interest rate trajectory through 2025 and 2026.

Despite stronger-than-expected U.S. retail sales in November, which suggest economic resilience, the market has largely priced in the expected rate cut. However, the likelihood of another reduction in January remains low, with only a 16.3% chance currently anticipated.

Analysts Predict Potential Gold Price Increase Post-Fed Announcement

Analysts suggest that gold prices could strengthen following the Fed’s announcement. Matt Simpson, a senior analyst at City Index, noted that if the Fed implies fewer rate cuts for the upcoming year, it could benefit gold, potentially leading to a price increase.

Global Central Banks’ Policy Decisions Also in Focus

In addition to the Federal Reserve, other central banks, including the Bank of Japan, Bank of England, Riksbank, and Norges Bank, are scheduled to deliver their policy verdicts later this week. These decisions are expected to influence global financial markets and could have implications for gold prices.

Key Economic Data Releases to Influence Market Sentiment

Traders are also closely monitoring upcoming U.S. GDP and inflation data, which are set to be released later this week. These indicators will provide additional insights into the health of the economy and could further influence market sentiment and expectations regarding future monetary policy actions.

Technical Analysis Indicates Potential Support and Resistance Levels

From a technical perspective, gold is trading below the 50-hour Exponential Moving Average (EMA), positioned near $2,651.86, indicating bearish pressure. The Relative Strength Index (RSI) stands at 46.41, suggesting neutral momentum with a slight downside bias.

Immediate support is identified at $2,633.53; a break below this level could lead to further declines toward $2,617.18. Conversely, overcoming immediate resistance at $2,664.49 may signal a reversal and open the path toward higher resistance levels.

Conclusion: Investors Should Monitor Upcoming Economic Indicators

As the Federal Reserve’s policy decision approaches, gold prices are exhibiting cautious optimism. The anticipated rate cut, along with the Fed’s forward guidance, will play a crucial role in shaping market expectations and the future trajectory of gold prices.

Investors should remain attentive to the central bank’s announcements and upcoming economic data releases to gauge the potential impact on the precious metals market.