Gold Price Forecast: XAU/USD loses momentum below $2,000, focus on Fed rate decision
- Gold price loses momentum for the third consecutive day on the higher US Treasury yields.
- The FOMC has signaled that it will not hike rates at its November meeting.
- The downbeat Chinese data raised concerns about the economic recovery in the world’s second largest economy.
- The FOMC meeting and press conference will be the closely watched events by traders.
Gold price (XAU/USD) loses traction during the early Asian trading hours on Wednesday. The yellow metal hovers around $1,984 after facing rejection to hold above the $2,000 mark. Investors await the Federal Open Market Committee (FOMC) policy meeting, with no change in rates expected.
Meanwhile, the US Dollar Index (DXY), the value of the USD relative to a basket of global currencies, consolidates its recent gains around 106.71 after bouncing off the low of 105.90. The US Treasury bond yield moves a little, with the 10-year Treasury bond yield hovering around 4.92%.
The FOMC has signaled that it will not hike rates at its November meeting, thus investors will keep an eye on the FOMC’s message during the press conference about how high the bar is to convince the FOMC to raise the interest rates again. Last week, the Federal Reserve (Fed) Chair Jerome Powell affirmed that another rate hike is possible if high economic growth and a labor shortage continue. That being said, rising interest rates raise the opportunity cost of investing in non-yielding assets, implying a negative outlook for precious metals.
The weaker-than-expected Chinese data on Tuesday raised concerns about the economic recovery in the world’s second-largest economy. China’s Manufacturing Purchasing Managers' Index (PMI) came in at 49.5 in October from 50.2 expansion in September, below the market consensus of 50.2. Meanwhile, the Services PMI fell to 50.6 in October from the previous reading of 51.7, worse than the 51.8 expected. This, in turn, exerts some selling pressure on the gold price as China is the world's largest gold producer and consumer.
Nonetheless, the elevated geopolitical risks in the Middle East might boost the safe-haven asset like gold. US Secretary of State Antony Blinken will travel to Israel on Friday for meetings with members of the Israeli government before making another stop in the region.
Gold traders will monitor the US ADP employment report, JOLTS, and the ISM Manufacturing PMI. The attention will shift to the FOMC decision and press conference on Wednesday. These events could give a clear direction to gold price.