Ladies and gentlemen, please take your seat and fasten your seat belt, as we’re approaching the FOMC meeting and there could be some turbulence! Actually, gold has already entered an area of turbulence and has declined below the psychologically important level of $1,700. As the chart below shows, the price of the yellow metal has declined from $1,726 last week to the current level of $1,664, in a response to the strengthened expectations of a more hawkish Fed.

The sad truth is that if today’s FOMC meeting turns out to be more hawkish than expected, gold may go down even further. On the other hand, if the Fed surprises markets with a dovish side and provides some clues about the end of its tightening cycle, gold may catch its breath and even rebound somewhat.

From a technical analysis perspective, XAU/USD daily chart illustrates the pair as downward biased. However, it should be noted that as price action reached lower lows, the Relative Strength Index (RSI) did the opposite. This means that a positive divergence might be forming. However, gold’s early gains are mainly attributed to Putin’s commentary, meaning that once the Fed’s decision crosses newswires, the noise would dissipate, giving a clear look of the yellow metal price action.

Resistance levels lie at the weekly high at $1679.51, followed by July 21 low at $1681, and then the $1700 mark. On the flip side, the XAU/USD first support would be the weekly low at $1659, followed by the YTD low at $1654, and then a fall towards $1600.

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Sep 21 2022