Gold Price Forecast: XAU/USD tumbles after breaking under $1840 ahead of the Fed

• Gold breaks under 1840$ and drops to the lowest in two days.
• US dollar remains mixed across the board as market participants await the FOMC statement.
• Wall Street opens in green, recovering from Tuesday’s slide.

Gold prices tumbled after the beginning of the American session. XAU/USD broke under 1840$ and quickly dropped to the 1830$ area, reaching the lowest level in two days. It remains under pressure ahead before the FOMC statement.

Probably technical factors weighed on the last leg lower in XAU/USD. The area around 1840$ offered support during several hours. Now the yellow metal is about to test the key $1830 support zone. A break lower would add more pressure, probably accelerating the decline. If XAU/USD holds above $1830, a rebound seems likely. The $1850 zone is the relevant resistance.

Market participants await the outcome of the FOMC meeting. The statement will be delivered at 19:00 GMT and could significantly impact gold prices. “A hawkish hold is widely expected as the Fed sets the market up for liftoff at the next meeting March 15-16.  WIRP (Bloomberg World Interest Rate Probabilities) suggests a hike then is fully priced in, as are three more quarterly hikes this year.  There won’t be any updated macro forecasts or Dot Plots for today’s decision, but we expect Chair Powell to send a very clear signal that the Fed is looking beyond recent stock market volatility and instead focusing on the tight labor market” explained analysts at Brown Brother Harriman.

“Markets will be keen to see any clues on how soon the Fed will allow balance sheet runoff.  We had thought this would be a 2023 story, but given recent official comments and the Fed’s accelerated timeline, we believe runoff will begin in Q3”, said a BBH report. They warn of some possible “buy the rumor, sell the fact” price action after the decision that could send the dollar lower, and could benefit XAU/USD, particularly if the same behaviour takes place in the bond market.

Technical levels