- The prevalent selling bias around the USD assisted gold to regain traction on Wednesday.
- The prevalent risk-on mood might keep a lid on any strong gains ahead of the Fed decision.
Gold edged higher through the early European session and was last seen trading near the top end of its daily range, just below the $1970 level.
The precious metal managed to regain some positive traction on Wednesday and inched back closer to two-week tops set in the previous session. A softer tone surrounding the US dollar was seen as one of the key factors that benefitted the dollar-denominated commodity.
Adding to this, expectations of a dovish Fed and a modest slide in the US Treasury bond yields further drove some flows towards the non-yielding yellow metal. However, the prevalent risk-on sentiment could undermine the precious metal’s safe-haven demand and cap the upside.
The global risk sentiment remained supported by the latest optimism over a potential vaccine for the highly contagious coronavirus disease. It is worth recalling that AstraZeneca resumed the phase-3 trials for its vaccine candidate and Pfizer announced the likelihood of presenting late-stage data for its own vaccine by late October.
From a technical perspective, the commodity on Tuesday failed to make it through the $1972 supply zone. This, in turn, further warrants some caution for bullish traders and positioning for any strong gains ahead of the latest FOMC monetary policy update.
The Fed is scheduled to announce its decision later during the US session and will also release its updated economic/inflation projections. The Fed is expected to maintain an accommodative approach to inflation and indicate to keep interest rates lower for longer.
Heading into the key central bank event, traders will take cues from the release of the US Monthly Retail Sales figures. The data might influence the USD price dynamics and produce some short-term trading opportunities during the early North American session.
Technical levels to watch
