Gold consolidates in a range above $1950 level, FOMC decision awaited

• Gold now seems to have stabilized following the previous day’s volatile swings.
• A combination of factors should attract some dip-buying and help limit any slide.
• Wednesday’s focus will remain on the highly anticipated FOMC policy decision.

Gold now seems to have entered a bullish consolidation phase and was seen oscillating in a narrow band, just above the $1950 level through the early European session.

Following the previous day’s intraday volatile swings, the commodity held steady during the first half of the trading action on Wednesday. Investors now seemed to have moved on the sidelines and await the highly anticipated FOMC decision before placing fresh directional bets.

The Fed is widely expected to keep its policy measures unchanged and a hint of a possible dovish shift in the monetary policy stance amid worries that the economic recovery in the US could be grinding to a halt in the wake of the continuous surge in the coronavirus cases.

This coupled with the impasse over the next round of the US fiscal rescue package kept the US dollar bulls on the defensive. In fact, the USD Index languished near two-year lows, which further seemed to extend some additional support to the dollar-denominated commodity.

The combination of factors support prospects for additional gains, though warrant some caution amid overbought conditions on daily charts. Heading into Wednesday’s key event risk, the set-up suggests that the commodity is more likely to consolidate in a range.

Technical levels to watch