Spot gold rebounds ahead of U.S. Fed Policy Decision

September 21, 2021 - 1 month ago
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The precious yellow metal appeared steadier on Tuesday as the risk event turns to the U.S. Federal Open Markets Committee (FOMC) when they begin their two-day policy meeting, ahead of its policy announcement on Wednesday afternoon (Thursday 4 am Sydney time).

Eyes will be on what U.S. Fed Chair Jerome Powell says at a post-meeting news conference Wednesday, especially concerning inflation, economic growth, interest rates and when the Fed will likely start reducing its purchases of government bonds.

In other news, growing concerns over China’s second-largest builder and land developer Evergrande Group could default on billions of debt, a scenario that would have ripple effects across the economy.

Evergrande Group is the most debt-laden property developer globally, with liabilities in excess of $300 billion.

This month, it sounded the alarm that it could not keep up with its obligations to lenders, investors, and suppliers.

Construction on many of its projects has halted and, amid a wider debt crackdown in Beijing, concerns are mounting that the company’s failure could spark a broader crisis in the real estate market, a key engine of China’s economy.

Some experts have compared the distress of Evergrande to the fall of Lehman Brothers in 2008, one of the largest casualties in the global financial crisis.

Meanwhile, the US Dollar index (US DXY), which measures the greenback strength against a basket of six leading peers, is trading at 93.20 (as of writing).

Viewing the technical aspect, the Relative Strength Index (RSI) 3-daily ‘lookback’ indicator holds a negative signal, while the Moving Average Convergence Divergence (MACD) is married to the RSI negative bias.

With the bearish challenges reached, in terms of their objectives, plus a modest bounce from $1,748, gives a neutral view in the short term.

However, one takeaway is a close beneath $1,748 would expose a $1,726-28 region (potential target), while a close above $1,766-68 could inject bullish momentum to the challenge of $1,794.

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