Title: Gold Price Analysis: XAU/USD fails again to break above 50DMA as Fed meeting eyed

Dec 13, 2021 9:41PM ET

By: AnalysisWatch

Spot gold (XAU/USD) prices rose slightly at the start of the week, but again failed to hold north of the 50-day moving average, currently at $1793. Spot prices moved above $1790 and were close to testing this level at the start of the trading day, but have since fallen back and are now trading in the mid $1780s. Spot gold prices are higher by about 0.25% on the day, helped by a decline in US long-term government bond yields that helped shield gold prices from a slight appreciation in the US dollar.

Spot gold costs have been not able to mobilize north of the 50DMA all through December, and Monday's failure is not too surprising given the proximity of key central bank events during the week. The most important event for gold prices is, of course, Wednesday's FOMC meeting, at which the Fed is expected to announce a doubling of the pace of quantitative bond purchase reductions from the current $15 billion per month to $30 billion per month. Of most interest to markets will be the language changes in the statement, the Fed's new dot plot, and updated economic forecasts. The dot plot is likely to show that Fed members expect two forecasts at once in 2022.

Most strategists expect the dollar and short-term and real yields to remain well supported this week as the Fed is likely to lean towards the hawks. This is probably not a good recipe for gold, and the bears will be looking for a move lower to test the recent lows in the $1770 area.