Gold price holds steady near all-time peak; Fed decision awaited

Gold price sits near a record high amid geopolitical risks and rising trade tensions.

Fed rate cut bets benefit the non-yielding yellow metal and remain supportive. 

A modest USD bounce caps the commodity ahead of the crucial FOMC decision.

Gold price (XAU/USD) enters a bullish consolidation phase near the all-time peak as bulls pause for a breather and opt to wait for the outcome of a two-day FOMC policy meeting due later during the US session on Wednesday. Market consensus strongly suggests that the Federal Reserve (Fed) will keep the federal funds rate unchanged at the current range of 4.25% to 4.50%. Hence, the focus will be on updated economic projections and the post-meeting press conference, where comments by Fed Chair Jerome Powell will be scrutinized for cues about the future rate-cut path. This, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide some meaningful impetus to the non-yielding yellow metal.

Heading into the key central bank event risk, some repositioning trade assists the USD in recovering slightly from its lowest level since October touched on Tuesday and acts as a headwind for the Gold price. The downside, however, remains cushioned in the wake of the uncertainty over US President Donald Trump's aggressive trade policies and their impact on the global economic outlook. Apart from this, the risk of a further escalation of geopolitical tensions in the Middle East continues to act as a tailwind for the safe-haven bullion and supports prospects for an extension of a multi-month-old uptrend. However, slightly overbought conditions on the daily chart might hold back traders from placing fresh bullish bets around the XAU/USD pair.

Daily Digest Market Movers: Gold price bulls turn cautious ahead of the highly-anticipated FOMC decision

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• Gold price shot to a fresh record high, around the $3,038-3,039 region on Tuesday as rising Middle East tensions and concerns about US President Donald Trump's tariff plans continue to fuel demand for the safe-haven asset.

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• Israeli airstrikes on Hamas targets in Gaza, killing more than 400 people. Israeli Prime Minister Benjamin Netanyahu said he ordered strikes because Hamas had rejected proposals to extend the ceasefire held since January. 

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• Trump has threatened to impose reciprocal and sectoral tariffs, which he said will come into effect on April 2. This comes on top of a flat 25% duty on steel and aluminum since February, fueling global trade war fears.

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• Traders ramp up their bets that the Federal Reserve will have to lower interest rates this year by more than expected amid the rising possibility of an economic downturn on the back of the Trump administration’s aggressive policies. 

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• The current market pricing indicated the possibility that the Fed could lower borrowing costs by 25 basis points each at the June, July, and October monetary policy meetings, which further underpins the now-yielding yellow metal.

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• The US Dollar stages a modest bounce from over a five-month low touched on Tuesday as traders opt to lighten their bearish bets ahead of the FOMC decision, scheduled to be announced later during the US session this Wednesday. 

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• The accompanying monetary policy statement and comments by Fed Chair Jerome Powell will be scrutinized closely for cues about the future rate cut path, which will drive the USD demand and influence the XAU/USD pair.

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Gold price needs to consolidate before the next leg up amid slightly overbought RSI on the daily chart

The daily Relative Strength Index (RSI) is holding above the 70 mark, suggesting slightly overbought conditions. Heading into the key central bank event risk, this makes it prudent to wait for some near-term consolidation or a modest pullback before traders start positioning for any further appreciating move. Meanwhile, the recent breakout and acceptance above the $3,000 psychological mark suggests that the path of least resistance for the Gold price remains to the upside. 

Meanwhile, any corrective slide could be seen as a buying opportunity and remain limited near the $3,005-3,000 area. This is followed by support near the $2,980-2,978 region, which if broken might prompt some technical selling and drag the Gold price to the $2,956 zone. The downward trajectory could extend further towards the $2,930 intermediate support before the XAU/USD eventually drops to the $2,900 mark en route to last week's swing low, around the $2.880 region.