Gold pulls back below $2,760 as markets prepare for the Federal Reserve’s decision
Gold faces challenges in extending Tuesday’s gains, trading lower below $2,760 on Wednesday. With investors staying on the sidelines ahead of the Federal Reserve’s monetary policy announcement, XAU/USD is struggling to gain directional momentum.
Markets are in a wait-and-see stance, anticipating that the Federal Reserve will pause interest rate cuts while signaling the next policy moves. According to LSEG data, the market expects nearly 50 basis points of cuts this year, with two 25-basis point reductions potentially starting in June.
READ MORE – DAILY TECHNICAL ANALYSIS BY CAPITAL STREET FX
Fed Chairman Jerome Powell’s press conference will be closely watched for clues on the timing and scope of future rate cuts, especially under US President Donald Trump’s second term. Trump’s immigration and trade policies are viewed as inflationary, which could prompt the Fed to keep rates higher for longer, negatively affecting the non-interest-bearing gold price.
If Powell and his colleagues express confidence in disinflation and acknowledge weakening labor market conditions, markets could interpret this as a dovish stance, raising expectations for future rate cuts and pushing gold prices to new record highs.
In the meantime, Gold will continue to find support from stabilizing risk sentiment, a generally subdued US Dollar, and holiday-thinned trading conditions. China, Singapore, and Hong Kong markets are closed for the Lunar New Year holiday.
The global market is recovering from a sell-off driven by China’s low-cost AI model, DeepSeek, as attention shifts to the earnings reports of major US tech companies, including Microsoft, Meta, and Tesla, due later Wednesday.
If these earnings disappoint or budget forecasts fail to convince investors, a renewed global tech sell-off could trigger a “sell-everything” mentality, which might reverse any reactions to the Fed’s policy announcements or extend the downside if the Fed holds a hawkish stance.