- Gold prices consolidate losses as investors wait for the Fed.
- Strong employment and sticky inflation have cooled hopes of a Fed pivot.
- XAU/USD is hovering right above an important support area.
Gold prices (XAU/USD) remain practically flat for the second consecutive day on Wednesday. The precious metal is consolidating losses, with investors reluctant to take positions ahead of the Federal Reserve’s (Fed) monetary policy decision, due later today.
Tuesday’s United States (US) Consumer Price Index (CPI) data showed an unexpected increment in prices in November. The yearly inflation eased to 3.1% from 3.2% and the core CPI, which removes the impact of seasonal assets like food and energy, remained steady at 4%.
These figures show the serious challenge ahead for the Fed to run the last mile on inflation, which coupled with the strong employment data seen last Friday cast serious doubts about the chances of rate cuts in March.
In this context, the US Dollar remains steady and Gold prices remain below the psychological $2,000 level as we head into the all-important Fed decision.
The US central bank is widely expected to leave its benchmark interest rate on hold at the 5.25%-5.5% band. Traders will be attentive to the interest rate projections, the so-called dot plot, and Fed Chairman Jerome Powell press conference for clues on the next monetary policy steps.
Daily Digest Market Movers: Gold loses momentum as hopes of imminent Fed cuts fade
- Gold is practically flat with investors awaiting the outcome of the Federal Reserve’s meeting for more clues on the bank’s monetary policy outlook.
- Tuesday’s data showed an unexpected increase in US consumer inflation in November, which has cooled expectations of a Fed pivot in the first quarter of 2024.
- US Consumer Price Index (CPI) edged up 0.1% in November, against market expectations of a flat performance, while year-on-year the CPI eased to 3.1% from 3.2% in October.
- The core CPI inflation, which excludes volatile food and energy prices, met expectations and remained steady at 4.0% year-on-year.
- November’s inflation, coupled with the strong employment seen on Friday, reveals that the Fed faces a serious challenge to bring the CPI down to the 2% target.
- In this scenario, investors are holding their breath ahead of Federal Reserve’s monetary policy decision, due later on Wednesday.
- The Fed is widely expected to leave its benchmark rate at the current 5.25 -5.5% band. The main attraction of the event will be the interest-rate projections and Chairman Powell’s comments at the press conference.
- In China, a meeting of top leaders has failed to deliver any significant economic stimulus measures, which has disappointed investors, dampening the market mood.
Technical Analysis: Gold prices hover above an important support area at $1,970
Technical indicators show a bearish picture for Gold, with bulls capped well below the $2,000 psychological level and support at the $1,970-$1,980 under increasing pressure.
Price action has broken below the main Simple Moving Averages (SMAs) in the 4-hour charts, and an impending bearish cross between the 50 and 200 SMAs is giving fresh hopes for bears.
Bullion trades now right above $1,980, where the neckline of a head and shoulders (H&S) pattern meets the 50% Fibonacci retracement of the October – December rally.
A confirmation below here would increase bearish pressure towards the mid-November lows and 61.8% Fibonacci retracement of the above-mentioned bull run, at the $1,935 area, ahead of $1,838, and the measured target of the H&S pattern at $1,851.
On the contrary, a bullish reversal from current levels is likely to meet resistance at the $2,000 psychological level, which closes the path toward $2,035 and $2,075.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.18% | 0.24% | -0.02% | 0.36% | 0.51% | 0.45% | -0.43% | |
| EUR | 0.17% | 0.42% | 0.15% | 0.53% | 0.68% | 0.64% | -0.25% | |
| GBP | -0.24% | -0.42% | -0.27% | 0.11% | 0.26% | 0.22% | -0.68% | |
| CAD | 0.03% | -0.15% | 0.26% | 0.38% | 0.53% | 0.49% | -0.41% | |
| AUD | -0.36% | -0.56% | -0.13% | -0.39% | 0.14% | 0.10% | -0.79% | |
| JPY | -0.51% | -0.69% | -0.36% | -0.54% | -0.15% | -0.05% | -0.95% | |
| NZD | -0.45% | -0.64% | -0.22% | -0.48% | -0.09% | 0.04% | -0.89% | |
| CHF | 0.43% | 0.26% | 0.66% | 0.40% | 0.78% | 0.93% | 0.88% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Dot Plot FAQs
The “Dot Plot” is the popular name of the interest-rate projections by the Federal Open Market Committee (FOMC) of the US Federal Reserve (Fed), which implements monetary policy. These are published in the Summary of Economic Projections, a report in which FOMC members also release their individual projections on economic growth, the unemployment rate and inflation for the current year and the next few ones. The document consists of a chart plotting interest-rate projections, with each FOMC member’s forecast represented by a dot. The Fed also adds a table summarizing the range of forecasts and the median for each indicator. This makes it easier for market participants to see how policymakers expect the US economy to perform in the near, medium and long term.
The US Federal Reserve publishes the “Dot Plot” once every other meeting, or in four of the eight yearly scheduled meetings. The Summary of Economic Projections report is published along with the monetary policy decision.
The “Dot Plot” gives a comprehensive insight into the expectations from Federal Reserve (Fed) policymakers. As projections reflect each official’s projection for interest rates at the end of each year, it is considered a key forward-looking indicator. By looking at the “Dot Plot” and comparing the data to current interest-rate levels, market participants can see where policymakers expect rates to head to and the overall direction of monetary policy. As projections are released quarterly, the “Dot Plot” is widely used as a guide to figure out the terminal rate and the possible timing of a policy pivot.
The most market-moving data in the “Dot Plot” is the projection of the federal funds rate. Any change compared with previous projections is likely to influence the US Dollar (USD) valuation. Generally, if the “Dot Plot” shows that policymakers expect higher interest rates in the near term, this tends to be bullish for USD. Likewise, if projections point to lower rates ahead, the USD is likely to weaken.