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Gold hits near 2-week peak on softer dollar; focus on Fed meeting

· Gold hit a near two-week high on Tuesday as the dollar weakened and investors turned their focus to a U.S. Federal Reserve monetary policy meeting, seeking details of how it planned to hold down rates while aiming to boost inflation.

· Spot gold was up 0.5% at $1,966.47 per ounce by 0512 GMT, after hitting $1,967.46 earlier, its highest level since September 2. U.S. gold futures climbed 0.7% to $1,976.90.

· “Gold looks firm mainly because of a weaker dollar and also U.S. Treasury yields are coming down a bit,” said Edward Meir, an analyst at ED&F Man Capital Markets.

· The dollar index slipped against its rivals, making gold less expensive for holders of other currencies.

· Market participants now await the U.S. Fed’s two-day policy event which ends on Wednesday, its first such meeting since Chairman Jerome Powell unveiled a policy shift towards greater tolerance of inflation, effectively pledging to keep interest rates low for longer.

· “After the Jackson Hole symposium, the market is asking for a bit more color around by what means the Fed plans to stoke inflation,” said IG Markets analyst Kyle Rodda.

· ″...it’s also asking for some indication that the Fed will continue to suppress risk-free rates, if inflation does begin to seriously emerge.”

· Gold, which has risen nearly 30% this year so far, is seen as a hedge against inflation. Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

· U.S. Treasury Secretary Steven Mnuchin and Jerome Powell will testify before the Senate Banking Committee on coronavirus relief, the committee said on Monday.

· Spot gold may test resistance at $1,975 per ounce, a break above could lead to a gain into $1,984-$1,996 range, said Reuters technical analyst Wang Tao.

· Gold Price Analysis: XAU/USD aims next two resistances, as $1969 gets tested – Confluence Detector

Gold (XAU/USD) is rejoicing another leg higher, sitting at the highest levels in nine days above $1960. Gold benefits from the US dollar weakness, as the greenback breaks lower on the return of the risk appetite, thanks to the stronger Chinese activity numbers and US-Sino trade optimism. Looming Brexit risks boost the safe-haven appeal of gold.

Coronavirus vaccine hopes will continue to bode well for global equities at the expense of the dollar, which is likely to render gold supportive. Let’s take a look at whether gold’s charts?

Gold: Key resistances and supports

The Technical Confluence tool shows that gold is on the verge of recapturing the robust barrier at $1969, which is the convergence of the pivot point one-week R1 and Bollinger Band 15-minutes Upper.

Alternatively, plenty of healthy support levels are likely to limit any retracements, with the immediate cushion aligned at $1962, the intersection of the previous day high, SMA200 four-hour and Bollinger Band four-hour Upper.

Sellers will then challenge minor support at $1957, where the Fibonacci 23.6% one-day and SMA5 four-hour coincide.

Further south, the Fibonacci 23.6% one-week level at $1951 will get tested. A break below which a dense cluster of support levels is seen around $1947.

The downside target of $1945 is the level to beat for the bears. That level is the Fibonacci 38.2% one-week.

· Price of Gold Fundamental Weekly Forecast – Fed May Not Deliver What Gold Bulls Want to Hear

COVID-19 vaccine developments and improving economic data present near-term headwinds to gold, while low and negative interest rates, a weaker U.S. Dollar and expectations for further stimulus keep the balance of risks to the upside.

Looking ahead to the Federal Reserve announcements after the two-day meeting on September 16, we expect to see a very carefully worded statement. The Fed is going to have to demonstrate patience before lifting rates as it waits for the economy to pick back up. But there is bad news. It might not have much ammunition left in its arsenal to stimulate the economy if it ends up needing more help. Therefore, we expect Fed Chair Powell to target Capitol Hill and ask for Congress to do more.

The bottom line: Don’t expect the Fed to say anything bullish for gold.

· Elsewhere, platinum rose 0.6% to $960.21 per ounce after hitting its highest since August 18 at $966.

· Silver gained 1% to $27.44 and palladium eased 0.1% to $2,311.78.

Reference: CNBC, FXStreet, FXEmpire