Market Analysis

Gold prices (XAU/USD) are struggling to build on recent modest gains and are trading with a slight downward trend during the early European session on Wednesday. The decline lacks momentum as market participants await the release of the latest US consumer inflation data and the outcome of the Federal Open Market Committee (FOMC) meeting later today. These events are crucial for determining when the Federal Reserve (Fed) might start reducing interest rates, which will significantly impact the short-term direction of the non-yielding precious metal.

Investors have tempered expectations for an immediate Fed rate cut in September due to a robust US labor market and persistent inflation pressures, bolstering the US Dollar (USD) near a one-month high. This has become a major headwind for gold prices. However, geopolitical tensions and political uncertainties in Europe are providing some support, cautioning against aggressive bearish positions after the recent retreat from all-time highs.

From a technical standpoint, gold faces immediate support near the $2,300 level, with the $2,285 zone crucial below that. Friday's breach below the 50-day Simple Moving Average (SMA) could signal further downside if sustained, potentially targeting support around $2,254-2,253 and extending towards $2,225-2,220 before reaching $2,200. On the upside, resistance is seen near $2,325, reinforced by the 50-day SMA around $2,345 and the supply zone of $2,360-2,362. Clearing these levels decisively could pave the way for a retest of last week's high near $2,387-2,388 and a move towards reclaiming the $2,400 mark, signaling a reversal of the short-term negative bias.

Paraphrasing text from "FX Street" all rights reserved by the original author.