Gold Price Analysis: XAU/USD stabilises in $1770 area, in wait-and-see mode ahead of Fed

• Spot gold has stabilised in the $1770 area ahead of Wednesday’s key Fed meeting.
• The bank is expected to be hawkish and this could send the precious metal underneath recent $1760 lows.

Since Tuesday’s hot US Producer Price Inflation (PPI) report-induced drop from the upper $1780s to current levels around $1770, spot gold (XAU/USD) has stabilised and is trading within thin ranges. That isn't too surprising and is in fitting with the broader market’s cautious tone, ahead of key events stateside, with the main event of the day being the Fed policy announcement at 1900GMT and Fed Chair Jerome Powell’s press conference at 1930GMT.

The Fed is widely expected to pivot hawkishly by speeding the pace of its QE taper, pointing to a sooner start to its rate hiking cycle and upgrading its inflation forecasts. Strategists are split over whether markets have adequately priced in all of this hawkish risk. If they haven't, gold would be at risk of seeing a further tumble and XAU/USD would be vulnerable to a drop under recent lows in the $1760s. In the case of a dovish outturn from the bank later in the session, gold prices would likely see a retracement higher to challenge monthly peaks and the 21 and 50-day moving average in the $1790s.

Ahead of the Fed, gold traders will also be keeping an eye on a few important US data releases, including the November Retail Sales report and the NY Fed Manufacturing survey. Both reports will be released at 1330GMT and, unless there is a big miss/beat on expectations, are unlikely to stimulate too much volatility, as traders keep their powder dry ahead of the Fed. That implies for the next few hours, spot prices are likely to stick within intra-day $1765-$1775ish ranges.