Gold Price Analysis: XAU/USD eases above $1,700 as risk dwindles ahead of Fed
- Gold fades bounce off $1,726, struggles for a clear direction off-late.
- Vaccine crisis, pre-Fed caution join threats from Iran, North Korea to weigh on the mood.
- US Treasury yields regain 1.60% level, stock futures track Wall Street benchmarks in trading mixed.
- All eyes on Fed, inflation data from Europe, Canada can offer intermediate moves.
Gold fails to defy the pre-Fed pressure while staying directionless around $1,730 during the early Wednesday morning in Asia. Other than the cautious sentiment ahead of the US Federal Reserve (Fed) monetary policy meeting, geopolitical headlines from North Korea and Iran, not to forget China, also challenge the risks.
Powell and Company keep the driver’s seat…
Following US President Joe Biden’s ability to keep his promise of a $1.9 trillion coronavirus (COVID-19) stimulus package, markets turn to the US central bank for their take on the much-awaited fiscal relief and its possible impact on the economic recovery. Also important is the Federal Open Market Committee (FOMC) dot-plot and Chairman Jerome Powell’s fears of reflation
Read: Federal Reserve Preview: The Good, the Bad and the Ugly edition, three critical things to watch
Although traders follow logic while ignoring upbeat US dollar and recovery in the Treasury yields, alleged weapons test by North Korea, as well as Iran’s secret rush for nuclear arsenal keep the risks heavy and exert additional downside pressure on the yellow metal. Early Wednesday, CNN came out with the news suggesting North Korea could be preparing to carry out the first weapons test since Biden took office. Further, news that Iran is said to be enriching more Uranium and the UK readies extra pressure beyond the nuclear deal to tame Tehran also challenges sentiment. It should be noted that the S&P’s US rating update adds to the market’s confusion.
On a different ground, European nations keep dumping the AstraZeneca vaccine even as multiple authorities, including the World Health Organization (WHO), said it's safe. Also on the risk-negative side could be the mixed welcome of US Secretary of State Antony Blinken during the first Asia-Pacific visit as the Biden Administration member.
Amid these plays, S&P 500 Futures follow Wall Street benchmarks in flashing mixed signals whereas the US 10-year Treasury yields stay firm around 1.62% after the recent recovery.
Moving on, Consumer Price Index (CPI) figures from Europe and Canada will join risk headlines to offer intermediate moves to the markets but nothing more important than the Fed’s move.
Technical analysis
Tuesday’s gravestone Doji candlestick on the daily chart suggests further downside of gold towards retesting the $1,700 threshold. Alternatively, 21-day SMA around $1,741/42 guards immediate upside.