Gold Price Analysis: XAU/USD climbs to one-week top, around $1865 ahead of FOMC

• Gold continued gaining traction for the second consecutive session on Wednesday.
• Sustained USD selling bias was seen as a key factor driving the commodity higher.
• The risk-on mood did little to hinder the positive move ahead of the FOMC decision.

Gold extended its stead intraday positive move and climbed to one-week tops, around the $1865 region during the first half of the European session.

The precious metal added to the previous day’s goodish recovery gains from two-week lows and continued scaling higher for the second consecutive session on Wednesday. The move was sponsored by sustained selling around the US dollar, which tends to benefit the dollar-denominated commodity.

In fact, the USD Index dropped to fresh two-and-half-year lows amid expectations for additional US fiscal stimulus measures. The USD selling pressure aggravated further amid a strong pickup in the shared currency following the release of upbeat Eurozone PMI prints for December.

Apart from this, a modest pullback in the US Treasury bond yields further undermined the greenback and drove some additional flows towards the non-yielding yellow metal. The momentum seemed rather unaffected by the upbeat market mood, which tends to undermine the safe-haven XAU/USD.

The global risk sentiment remained well supported by the latest optimism over the rollout of vaccines for the highly contagious coronavirus disease and hopes for a Brexit deal. This might eventually turn out to be the only factor capping any further gains for the commodity, at least for now.

Investors might also refrain from placing aggressive bullish bets ahead of Wednesday’s key event risk – the latest FOMC monetary policy update. The Fed is scheduled to announce its decision later during the US session and help determine the next leg of a directional move for the XAU/USD.

Technical levels to watch