Gold Price Forecast: Bears taking on bullish commitments ahead of Fed

• Gold is on the verge of a downside breakout while below $1,790.
• The Fed is the main event for the day and a hawkish outcome could weigh on gold. 
• The price is below bearish leaning daily 10 and 20 EMAs.

The price of gold, XAU/USD, is down some 0.90% on the day trading near $1,770 and falling from a high of $1,789.54 to a low of $1,766.58. The greenback has done well in a slightly risk-off market environment which has favoured the greenback over its other safe haven peers, such as gold. 

All eyes on the Fed

The US dollar, as measured by the DXY index and vs a basket of major currencies, rallied from a low of 96.10 to a high of 96.59 so far. The Federal Reserve is eagerly awaited today which weighed on equities that traded on the defensive, aiding the greenback to move higher. The S&P 500 dropped 0.8% to 4,634.09 and the Nasdaq Composite fell 1.1% to 15,237.64, while the Dow Jones Industrial Average slipped 0.3% to 35,544.18. The 10-year US Treasury yield rose 2 basis points to 1.44%.

 The Federal Reserve began a two-day policy meeting at which it could decide to pare its asset purchases faster than previously planned. The Fed is expected to show a higher dot plot and to double the pace of tapering from USD15bn to USD30bn. ''Fed fund futures are currently pricing 68bps of tightening for next year with fed funds at 1.40% by the end of 2023,'' analysts at ANZ Bank explained.

''Anything in excess of that, or a higher terminal rate (currently 2.5%), will be seen as hawkish. It will also be important to watch the inflation and unemployment forecasts,'' the analysts added. ''In September the FOMC forecast inflation at 2.2% in Q4 2022 and 2023 with the unemployment rate at 3.8% and 3.5% respectively. If inflation forecasts are raised it would show greater uncertainty about the FOMC’s confidence in meeting its inflation target.''

Gold technical analysis

Technically, from a daily perspective, the price is below bearish leaning 10 and 20 EMAs and it could be on the verge of breaking the daily support. However, failures to do so could lead to an upside breakout as follows: