Gold prices edged down on Wednesday as investors are in wait-and-see mode ahead of the Federal Reserve monetary policy meeting later in the day. Equities trade higher, adding pressure to all metals.
Silver, Copper, and Palladium are extending loses too due to risk appetite and caution before the Fed. The dollar index is down also.
Light economic calendar except in America
With several countries in holidays due to labor day, the economic calendar has been light in Asia and Europe. The exception was the United Kingdom with PMI manufacturing and housing data.
However, the calendar in the United States is busy with PMI, construction, oil and vehicle sales data due today. Also, the most significant event in the week will take place later on the day when the Federal Reserve will publish its monetary policy decision.
While nobody expects a rate cut, the market will focus on the statement and the following press conference to check what the intentions of the fed regarding a rate cut are. Is the Fed contemplating a cut? This very question will affect markets.
XAU/USD remains limited by the 20-day moving average
Gold is trading negative on Wednesday after a brief recovery performed on Tuesday. The unit remains limited by a 20-day moving average that has been acting as resistance in the last four trading sessions.
XAU/USD is currently trading at 1,281, 0.15% negative on the day. Earlier in the day, the pair dropped to 1,275, but the pair managed to recover to current prices.
Any movement in gold today will be Federal Reserve oriented as “a dovish Fed could be supportive for gold, but only if the news drives Treasury yields sharply lower,” as FX Empire analyst James Hyerczyk said in a recent article. “It’s not what the Fed says that drives gold prices, but rather how it affects interest rates.”
If the fed turns dovish and hints rate cuts in 2019 against what it was previously expected, dollar will push higher above 1,300 first, then 1,330 later.
On the other side, if the Fed stays in its position of a hiking path, gold will visit fresh lowers beyond 1,266 in the day to come.
Silver test the bottom side of its range
Silver is trading negative Wednesday as the pair is testing the bottom side of the range it has been trading in the last two weeks.
After breaking below 14.90, the pair is now trading at 14.83, 0.70% negative on the day. XAG/USD looks dovish and with more room to fall at least to 2019 lows at 14.75.
If the pair extends losses and closes below 14.75, it will enter in another congested area between 14.50 and 14.80.