Gold Price Forecast: XAU/USD is subdued around highs of $1860s pre-Fed decision

• The Gold Price is almost flat during the day as the FOMC decision looms.
• The sentiment is mixed, blamed on the Fed policy decision and China’s coronavirus crisis.
• Gold Price Forecast (XAU/USD): Neutral-downward biased, but upside risks remains due to Fed’s monetary policy decision.

Gold spot (XAU/USD) remains subdued ahead of the Federal Reserve May monetary policy decision, in which the US central bank is foreseen to lift the Federal Funds Rate (FFR) by 0.50% to 1%. Besides, it will also announce the pace of the Quantitative Tightening (QT), expected at $95 billion, $65 billion of US Treasuries, and $30 billion of mortgage-backed securities (MBS). At the time of writing, XAU/USD is trading at $1867.82 a troy ounce.

Sentiment has improved as the Fed’s monetary policy decision gets closer, the greenback weakens

The closer the Fed’s decision gets, the market mood turns mixed. US equities fluctuate between gainers and losers. At 18:00 GMT, the Federal Reserve would release its monetary policy decision, which would trigger sharp volatility in the markets. However, at around 18:30 GMT, the Fed Chair Jerome Powell would hold its first in-person press conference in two years, in which market players would look for any hawkish/dovish commentary that could provide some forward guidance ahead.

Aside from this, Wednesday’s sentiment was also struck by China’s ongoing coronavirus crisis. Although it appears that in Shanghai, the epidemic situation seems to improve, Beijing closed 40 metro stations as cases began to ramp up, threatening to slow down the second-largest economy in the world.

Geopolitics-wise, the Ukraine-Russia conflict remains unchanged amid the late lack of peace talks. The hostilities persist as Russia tries to seize the Donbas region in Eastern Ukraine. At the same time, the EU Commission President von der Leyen said there would be a complete import ban on all Russian oil, pipeline, crude and refined.

The US Dollar Index, a gauge of the greenback’s value against a basket of its peers, is pairing some earlier losses, down 0.09%, and sits at 103.360. Contrarily, the US 10-year benchmark note sits at 2.987%, up to one and a half basis points during the day.

During the day, the US economic docket featured April’s ADP Employment Change, a prelude to Friday’s Nonfarm Payrolls report. The figures showed that the US economy added just 247K jobs, lower than the 395K estimated, while the Balance of Trade for March showed a wider deficit, from $-89 billion to $-109 billion. Regarding the Non-Manufacturing PMIs, the so-called services for April decreased, while the S&P Global Composite Final report decelerated to 56 from 57.7.

Gold Price Forecast (XAU/USD): Technical outlook

Gold remains neutral-downward biased ahead of the Fed’s decision. As of writing, XAU/USD price is below the 50 and the 100-day moving averages (DMAs), a sign of the yellow-metal weakness. Also, on its way north lies a solid resistance area around March’s lows, previous support-turned-resistance at $1890, which in the event of XAU/USD prices shooting higher, would be difficult to overcome on its way north.

To the upside, gold traders need to be aware of critical levels, like the 100-DMA at $1881.38, followed by March’s lows at $1890 and the $1900 mark. On the other hand, XAU/USD’s first support would be May 3 daily low at $1850.34, closely followed by the 200-DMA at $1835.08, and then January’s 28 YTD low $1780.18.