Gold Price Forecast: XAUUSD oscillates around $1,860 ahead of Fed’s policy, DXY rebounds marginally

• Gold price is moving directionless as investors await monetary policy from the Fed.
• Bearish Pennant chart formation is favoring more downside.
• Fed looks certain to hike interest rates by 50 bps.

Gold (XAUUSD) Price is consolidating in a narrow range of $1,859.82-1,867.22 in the Asian session as investors have trimmed their positions and have preferred to remain on the sidelines ahead of the interest rate decision by the Federal Reserve (Fed) on Wednesday. The bright metal has lost its shine over the past few trading sessions as investors are shifting their mindset according to a tight liquidity environment for a prolonged period.

Multi-decade high inflation and an extremely tight labor market are forcing the Fed to return to neutral rates, which will demand a lengthy spell of rate hikes and will continue to dent the demand for the precious metal. Therefore, gold prices will continue to remain on tenterhooks at least for more than a year.

On Wednesday, an interest rate elevation by 50 basis points (bps) looks certain. But the catalysts, which are binding the sight of investors, are the roadmap for balance sheet reduction and guidance by the Fed. Meanwhile, the US dollar index (DXY) has recovered some of its intraday losses and has climbed above 103.50 as profit-booking fades.

Gold technical analysis

On an hourly scale, XAU/USD is forming a Bearish Pennant chart pattern that signals a continuation of a bearish momentum after a consolidation phase. The 20- and 50-period Exponential Moving Averages (EMAs) at $1,868.80 and $1,880.00 respectively are declining, which adds to the downside filters. Also, the Relative Strength Index (RSI) (14) has shifted into a bearish range of 20.00-40.00 which signals more pain ahead.

Gold hourly chart