Why Is Gold Holding Steady Ahead of Fed Meeting? | Key Factors Driving XAU/USD Price Action

Gold Maintains Cautious Gains Amid Fed Policy Anticipation

The Tether coinprecious metals market enters a holding pattern as investors globally await pivotal monetary policy signals from major central banks. While the Bank of Japan and Bank of England prepare their own announcements, all eyes remain fixed on the Federal Reserve's upcoming decision, creating nuanced trading conditions for gold bulls and bears alike.

Three Critical Factors Influencing Gold's Current Trajectory

• Central bank divergence: The Fed's potential hawkish tilt contrasts with other G10 central banks, creating currency crosscurrents that typically benefit dollar-denominated assets
• Yield curve dynamics: Recent spikes in Treasury yields have introduced headwinds for non-interest bearing assets, though gold's traditional inflation hedge properties provide counterbalance
• Positioning adjustments: Market participants appear to be reducing extreme short dollar positions ahead of the FOMC meeting, creating technical support for XAU/USD

Macroeconomic Backdrop: Mixed Signals Create Trading Range

Recent economic data releases present conflicting narratives about the US economic trajectory. While housing market indicators show surprising strength - with the NAHB Market Index climbing to 51 in March - other sectors demonstrate cooling conditions. This economic crosscurrent leaves gold traders navigating uncertain terrain, with the $2,160-$2,180 range becoming a critical battleground.

Technical Perspective: Bullish Structure Faces Resistance Test

The yellow metal's technical setup reveals several noteworthy developments:

• The daily chart shows gold consolidating near multi-month highs, with $2,195 representing the year-to-date peak
• Momentum indicators suggest potential exhaustion after the recent rally, with the RSI retreating from overbought territory
• Key support levels emerge at $2,146 (December high) and $2,123 (March low), while resistance clusters near the psychological $2,200 level

Fed Watch: How Policy Signals Could Reshape Gold's Path

Market participants currently price in approximately 58% probability of a June rate cut, down significantly from last week's 72% expectation. This repricing reflects:

• Stronger-than-anticipated inflation readings in recent reports
• Resilient labor market conditions despite gradual cooling
• The Fed's apparent commitment to data-dependent policy adjustments

Should the Fed maintain its projection of 75 basis points in cuts for 2024, gold could find fresh upward momentum. Conversely, any reduction in projected easing could strengthen the dollar and pressure precious metals.

Trading Outlook: Preparing for Potential Breakout Scenarios

Market technicians identify two plausible near-term scenarios for XAU/USD:

1. Bullish case: A sustained break above $2,180 could open path to test YTD highs near $2,195, with $2,200 representing the next psychological barrier
2. Bearish case: Failure to hold $2,160 support might trigger pullback toward $2,146, with $2,123 serving as stronger downside target

The coming sessions' price action will likely determine whether gold can maintain its upward trajectory or require a healthy correction before continuing its ascent. Traders should monitor Treasury yield movements and dollar index dynamics for confirmation signals.