The yellow metal persists to be pressured within a sideways channel after failing to break into the prior day’s resistance between $1,808 convincingly nor the support within the $1,790s.
The dollar, which has been otherwise bid over recent weeks on expectations that as the economy strengthened, the Fed will tighten its policies, has weakened this week as investors shunned big bets before Powell’s remarks.
On Tuesday, the US dollar has given back more ground as real US bond yields hit all-time lows, supporting the yellow metal. A sell-off in Chinese shares in Asia, coupled with economic growth concerns and an imminent Federal Reserve meeting put some investors on guard and drove profit-taking.
Forex investors are playing it safe ahead of the Fed meeting which will be followed by a press conference by Chair Jerome Powell on Wednesday, where investors will be snooping for any taper-related comments. Traders will be particularly looking out for comments with respect to inflation, economic growth, interest rates and the Fed’s plans for its purchases of government bonds.
On the other hand, tapering could be mentioned in the official statement, which would be a very hawkish surprise and would be expected to support the US dollar.
The US dollar smile theory could also come into play given the global spread of the delta variant. If the Fed sounds the alarm bells too aggressively, this could also tend to favor the dollar and cap any bullish advances in gold.
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