Gold Steady at $1,782 Ahead of FOMC and Fed Fund Rate Decision

Today, during the Asian trading session, the gold price failed to stop its downward rally of the previous-day, drawing some offers around the $1,780 level. The XAU/USD pair retreated to an intraday low of $1,779.45, amid contradictory market signals ahead of the decision by the US Federal Reserve (Fed). The Fed’s tapering tantrums are weighing on the GOLD prices.

With a $15 billion reduction in monthly asset purchases on the horizon, recent discussion about the US stimulus has also dampened the  sentiment surrounding gold. Gold traders will be focusing on the Fed’s timing of interest rate hikes and the inflation outlook, in order to drive the precious metal in a new direction. Later today, the US Fed will announce its decision, which is largely expected to include a schedule for asset tapering. It is anticipated that the central bank will lessen monthly asset purchases by $15 billion per month until they are finally phased out by mid-2022. however, the timing of the interest rate hikes is unclear.

Yesterday, Wall Street saw significant increases, on the back of better-than-expected earnings, and optimism about the US stimulus package. Following that, the market mood was strained by rumors of a further delay in the $1.75 trillion infrastructure stimulus and the Evergrande situation. Despite previous optimism about reaching an agreement this week, US Senator Joe Manchin told CNN that he has significant reservations that must be addressed, before the vote on the $1.75 trillion economic package.

The policymaker was quoted as having expressed renewed hope that, before Thanksgiving, a solution might be achieved that would earn his backing for President Joe Biden’s domestic program. Elsewhere, the rise in US inflation expectations, as indicated by the 10-year breakeven inflation rate according to the St. Louis Federal Reserve (FRED) statistics, is also putting pressure on the risk appetite, ahead of the critical Fed decision.

By the end of Tuesday’s North American trading, the inflation index had snapped a four-day decline, bouncing off its lowest levels since October 12. Commodities are still under pressure, while the significant currency pairs are looking for a new path. The Japanese bank holiday also restricts global bond transactions and adds filters to the market performance.

Despite the mixed market mood, the broad-based US dollar maintained its early-day upward rally and remained close to the year’s peaks in the Euro and the Yen. There is increasing speculation among investors as to whether the Federal Reserve of the United States will begin asset tapering sooner than its European and Japanese peers.

Later today, the Fed will announce its policy decision, and asset tapering is likely to begin. The main focus, though, is on when the central bank will raise interest rates. The US Dollar Index, which compares the US currency to a basket of other currencies, has fallen by 0.01 percent, to 94.070.

Due to a lack of essential data/events in Asia, gold prices may prolong their recent fall ahead of the October ADP Employment Change and PMIs in the United States. However, the Fed’s decision will be closely watched, to predict the near-term movements in gold.