Gold price remains close to record high, awaits pivotal Fed decision before the next leg up

• Gold price attracts some dip-buying and reverses a part of the overnight corrective slide.
  

• Bets for a 50 bps Fed rate cut keep a lid on the attempted USD recovery and lends support.
  

• Bulls seem reluctant to place aggressive bets ahead of the key central bank event risks.
  

Gold price (XAU/USD) witnessed a modest pullback from the vicinity of the record high, around the $2,589-2,590 area touched the previous day, and ended in the red for the first time in the last four days on Tuesday. The downtick was led by some profit-taking, albeit lacking any follow-through as traders opted to wait on the sidelines ahead of this week's key central bank event risks before placing fresh directional bets. The Federal Reserve (Fed) will announce its decision at the end of a two-day meeting later this Wednesday, which will be followed by the Bank of England (BoE) meeting on Thursday and the Bank of Japan (BoJ) policy update on Friday. 

In the meantime, the extensive pricing for an oversized interest rate cut by the Fed fails to assist the US Dollar (USD) in capitalizing on the overnight bounce from its lowest level since July 2023 and revives demand for the non-yielding Gold price. However, a 25 basis points (bps) rate cut could bode well for the USD and weigh on the commodity. That said, the risk of a further escalation of conflict in the Middle East, along with the US political uncertainty ahead of the November presidential election, could offer support to the precious metal and limit the downside. This, in turn, suggests that any corrective pullback might still be seen as a buying opportunity. 

Daily Digest Market Movers: Gold price continues to draw support from a combination of factors ahead of Fed

Bets for a more aggressive policy easing by the Federal Reserve will assist the gold price in attracting some dip-buyers on Wednesday and stall the overnight modest pullback from the vicinity of the all-time peak. 

According to CME Group's FedWatch Tool, the markets are currently pricing in a 65% chance that the US central bank will lower borrowing costs by 50-basis points at the end of a two-day meeting later today.

The yield on the benchmark 10-year US government bond bounced from a 16-month low following the release of US Retail Sales data on Tuesday, albeit lacks follow-through and caps the US Dollar recovery. 

The US Census Bureau reported that Retail Sales in the US rose 0.1% in August as compared to a decline of 0.2% expected, while sales excluding Autos missed consensus estimates and expanded by 0.1%. 

The upbeat data prompted some intraday USD short-covering move and pushed it away from the lowest level since July 2023, though the positive move runs out of steam amid dovish Fed expectations. 

At least nine people were killed in simultaneous explosions of handheld pagers used by Hezbollah members in Lebanon, raising the risk of a broader Middle East war and underpinning the safe-haven metal. 

Meanwhile, North Korea, days after offering a view into a facility built to enrich uranium for nuclear bombs, test-fired multiple ballistic missiles toward the South Korean and Japanese eastern seas on Wednesday. 

The market focus remains glued to the critical FOMC policy decision, which, along with updated economic projections, including the so-called 'dot plot', should provide a fresh impetus to the XAU/USD. 

Technical Outlook: Gold price seems poised to climb further, could aim to test ascending channel resistance near $2,610

From a technical perspective, bulls might now wait for a move beyond the $2,589-2,590 region, or the all-time peak touched on Monday, before placing fresh bets. The subsequent move up has the potential to lift the Gold price above the $2,600 mark, towards testing the top boundary of a short-term ascending channel extending from sub-$2,400 levels touched late June. The said barrier is currently pegged near the $2,609-2,610 area, which if cleared decisively will confirm a fresh breakout and set the stage for an extension of the recent well-established uptrend. 

On the flip side, some follow-through selling below the overnight swing low, around the $2,561-2,560 area, could pave the way for deeper losses towards the $2,530-2,525 strong horizontal resistance breakpoint. Any further decline is more likely to attract fresh buyers and remain limited near the $2,500 psychological mark. The latter should act as a key pivotal point, which if broken decisively could drag the Gold price to the $2,475-2,470 confluence – comprising the 50-day Simple Moving Average and the lower boundary of the aforementioned trend channel.