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  • Gold gains some traction for the third consecutive session on Wednesday.
  • Weaker USD, sliding US bond yields remained supportive of the move up.
  • The upbeat market mood might cap gains ahead of the key FOMC decision.

Gold edged higher for the third consecutive session on Wednesday and was last seen trading just below the $1720-22 pivotal resistance.

The US dollar added to its recent losses and the bearish pressure remained unabated through the Asian session on Wednesday. In fact, the key USD Index dropped to three-month lows and turned out to be one of the key factors underpinning demand for the dollar-denominated commodity.

Adding to this, investors now seemed to price in the possibility of a dovish outlook from the Fed. This was evident from some follow-through slide in the US Treasury bond yields, which provided an additional boost to the non-yielding yellow metal and remained supportive.

Meanwhile, the risk sentiment remained well supported by growing optimism over a sharp V-shaped recovery for the global economy and expectations that the worst of the coronavirus pandemic is over. This, in turn, might cap any strong gains for the safe-haven precious metal.

Hence, it will be prudent to wait for a sustained break through the $1720-225 barrier before traders start positioning for a move towards the $1740-45 supply zone. Market participants now look forward to the US consumer inflation figures for some impetus ahead of the FOMC decision.

The Fed is scheduled to announce its latest monetary policy update later this Wednesday and is expected to leave interest rates unchanged at the end of a two-day meeting. Hence, the key focus will be on the accompanying rate statement and the Fed Chair Jerome Powell’s comments at the post-meeting press conference.

Investors will look for clues about the future policy path, which will play a key role in influencing the near-term USD price dynamics and eventually provide a fresh directional impetus to the commodity.

Technical levels to watch

 

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