Gold Price Forecast: XAU/USD defends 100-day SMA ahead of the crucial FOMC decision

• Gold price attracts some buyers near 100-day SMA and recovers a part of the overnight losses.
• Bets for an imminent pause in the Federal Reserve's rate hiking cycle lend support to the metal.
• A softer risk tone also benefits the safe-haven XAU/USD, though a modest USD uptick caps gains.
• Investors also seem reluctant to place aggressive bets ahead of the key central bank event risks.

Gold price once again attracts some buyers near the 100-day Simple Moving Average (SMA) on Wednesday and recovers a part of the previous day's slide to the weekly low. The XAG/USD sticks to its modest intraday gains heading into the European session and currently trades just above the $1,945 level, though remains well within a familiar range held over the past three weeks or so.

Federal Reserve’s rate-hike pause expectations lend support to Gold price

Soft consumer inflation figures released from the United States on Tuesday reaffirmed market bets for an imminent pause in the Federal Reserve's (Fed) rate-hiking cycle, which, in turn, is seen lending some support to the Gold price. In fact, the US Labor Department reported that inflation, as measured by Consumer Price Index (CPI) barely rose in May and the year-on-year rate decelerated to the slowest pace since March 2021. The annual inflation print of 4.0%, meanwhile, is still twice the Fed's 2% target and kept hopes alive for further policy tightening by the Fed.

Modest US Dollar strength caps upside for XAU/USD

It is worth recalling that the markets are still pricing in a greater chance of an additional 25 basis point (bps) lift-off at the July Federal Open Market Committee (FOMC) policy meeting. This was seen as a key factor behind the overnight sharp rise in the US Treasury bond yields, which is seen acting as a tailwind for the US Dollar (USD) and acting as a headwind for the non-yielding Gold price. The downside, however, remains cushioned as traders seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the key central bank event risk.

Focus remains glued to key central bank event risks

The Fed is scheduled to announce its policy decision later during the US session, at 18:00 GMT and is widely expected to stand pat. Apart from this, market participants will closely scrutinize Fed Chair Jerome Powell's comments at the post-meting press conference for clues about the future rate-hike path. The focus will then shift to the European Central Bank (ECB) policy meeting on Thursday, followed by the latest monetary policy update by the Bank of Japan (BoJ) on Friday. In the meantime, a softer risk tone might continue to lend support to the safe-haven Gold price.

Gold price technical outlook

From a technical perspective, the $1,942-$1,940 area, or the 100-day SMA, might continue to act as immediate strong support. A convincing break and acceptance below will be seen as a fresh trigger for bearish traders. Some follow-through selling below the May monthly swing low, around the $1,932 region, will reaffirm the negative bias and make the Gold price vulnerable to accelerate the fall towards the $1,900 round figure. The downward trajectory could get extended further and drag the XAU/USD towards the $1,876-$1,875 horizontal support en route to the very important 200-day SMA, currently around the $1,839 region.

On the flip side, any meaningful intraday appreciating move now seems to confront resistance near the $1,962-$1,964 region ahead of the $1,970-$1,972 supply zone. This is followed by the $1,983-$1,985 hurdle and the $2,000 psychological mark. A sustained strength beyond the latter will shift the bias in favour of bullish traders and lift the Gold price to the next relevant resistance near the $2,010-$2,012 region.

Key levels to watch