Gold’s upside attempts remain limited with all eyes on the Fed

• Gold finds support at $2,630 but remains capped ahead of the Fed’s decision.
• The market is bracing for a Fed “hawkish cut” that might boost the US Dollar and weigh on Gold.
• XAU/USD remains under pressure, with upside attempts capped below $2,665.

Gold (XAU/USD) is practically flat on Wednesday after bouncing up from a one-week low the previous day. The precious metal remains on the defensive as the market braces for the outcome of the last Federal Reserve’s (Fed) meeting of the year.

The Fed is widely expected to cut interest rates by 25 basis points (bps), but the economic and rate hike projections will likely reveal a hawkish turn on the central bank’s forward guidance.

Recent US data shows that economic activity remains robust, consumption is buoyant, and inflationary pressures are high. Beyond that, US President-elect Donald Trump’s policies are expected to fuel price pressure higher.

This has forced investors to scale back monetary easing expectations, which is fuelling a sharp rebound in US Treasury yields and weighing on the yellow metal.

Gold remains vulnerable amid fears of a hawkish Fed 

• US Retail Sales released on Tuesday revealed a 0.7% increment in November, up from an upwardly revised 0.5% rise in October and beating expectations of a 0.5% increase.
   
• Consumption amounts to more than 60% of the US GDP, and these figures endorse the view of US economic exceptionalism in the context of a global economic slowdown.
   
• US data released earlier this week showed an unexpected improvement in services activity, pointing to healthy economic growth in the fourth quarter.
   
• Futures markets are almost fully pricing a 25 bps interest rate cut on Wednesday, according to the CME Group’s FedWatch Tool, but less than a 30% chance of more than two quarter-percentage cuts in 2025.
   

Technical analysis: XAU/USD consolidates losses with upside attempts limited below $2,665 

Gold has found some support at $2,630 and is consolidating recent losses, with investors looking from the sidelines ahead of the Fed decision. The short-term bearish trend, however, remains intact, with resistance at $2,665 capping upside attempts.

From a wider perspective, a potential double top at $2,720 suggests that a deeper correction is on the cards.

Immediate support is at $2,630 (December 17 low), while the $2,615-$2,605 area (November 25 and 26 lows) is the neckline of the previously mentioned double top. Below there, the next target would be November’s trough, at $2,540. On the upside, resistances are at the mentioned $2,665 (December 16 high) and 2,690 (December 13 high).
 

XAU/USD 4-Hour Chart