Gold Price Analysis: XAU/USD fluctuates in tight range above $1,950

• XAU/USD stays relatively calm after surging to fresh all-time highs on Tuesday.
• Selling pressure surrounding USD seems to have softened.
• Investors are waiting for FOMC to release its policy statement.

The troy ounce of the precious metal touched an all-time high of $1,981 on Tuesday but fell sharply to $1,900 area before closing the day in the positive territory. With the market action turning subdued ahead of the all-important FOMC monetary policy announcements, the XAU/USD pair is posting small daily losses near $1,955.

Will USD rebound after FOMC?

On Tuesday, the Federal Reserve announced that it extended its lending programs, which were scheduled to end on September 30th, to the end of the year. This development caused US Treasury Bond yields to turn south and weighed on the greenback, helping the pair recover sharply in the second half of the day.

With the Fed opting out not to wait to conclude its two-day meeting to notify markets of this decision, investors are not expecting any major changes to the policy outlook. If the FOMC keeps its policy guidance unchanged in its policy statement, US Treasury bond yields could stage a rebound and force XAU/USD to push lower by providing a boost to the greenback. At the moment, the US Dollar Index is losing 0.1% on the day at 93.62.

Following the impressive two-week rally that saw gold surging from $1,780 to $1,980, Citibank analysts said that they have revised their short-term target to $2,100. Analysts further added that they expect the troy ounce of the precious metal to reach $2,300 within six to 12 months.

Technical levels to watch for