Dec 15, 2021 8:12 AM ET
Since Tuesday's sharp drop in US producer price inflation (PPI) from the upper $1,780s to around $1,770 currently, the gold price (XAU/USD) has stabilised and is trading in a narrow range. This is not too surprising and is in line with the cautious tone of the overall market ahead of major events in the US, with the key event of the day being the Fed policy announcement at 19:00 GMT and Fed Chair Jerome Powell's press conference at 19:30 GMT.
The Fed is widely expected to adopt a hawkish stance by accelerating the pace of quantitative easing tapering, hinting at an earlier start to its rate hike cycle and raising its inflation forecasts. Strategists disagree on whether markets have sufficiently priced in all these hawkish risks. If they have not, there would be a risk that the gold price falls further and the XAU/USD falls below recent lows in the $1,760 area. If the bank were to make a positive statement later in the meeting, gold prices would likely rebound and target the monthly highs and the 21-day and 50-day moving averages in the $1,790 area.
Ahead of the Fed meeting, gold traders will also be keeping an eye on some key US data, including the November retail sales report and the NY Fed manufacturing survey. Both reports will be released at 13:30 CEST and, unless expectations are missed or exceeded by a wide margin, are unlikely to cause too much volatility as traders keep their powder dry ahead of the Fed. This means spot prices are likely to remain in the $1,765-$1,775 range over the next few hours.