Gold price (XAU/USD) extended its two-day losing spell but recovered some losses ahead of the interest rate decision by the Federal Reserve (Fed), private payrolls, and the Institute of Supply Management (ISM) Manufacturing PMI data for October. The precious metal falls sharply even though markets widely expect that the Fed will keep interest rates unchanged in the 5.25%-5.50% range. However, a hawkish interest rate outlook is highly anticipated as robust spending by households and strong labor market conditions keep upside inflation risks alive. Fed Chair Jerome Powell and his colleagues may keep the likelihood of further policy tightening on the table as the progress in inflation easing toward the 2% target has slowed due to strong wage growth. US households having high purchasing power are spending heavily, keeping the core Personal Consumption Expenditure (PCE) price index relatively stubborn.
Apart from the upcoming Fed decision, the broader appeal for Gold is still upbeat as Middle East tensions persist. The Israeli army is preparing for the ground incursion in Gaza as Israeli authorities rejected calls for a ceasefire. Gold price faced an extended sell-off while attempting to stabilize above the psychological resistance of $2,000. The precious metal drops sharply on expectations that the Fed will keep the door open for further policy tightening. The yellow metal has been trading in a range between $1,960 and $2,010 for the past week. The gold price has discovered some support near $1,970.00 but a volatile action is widely anticipated after the Fed’s policy announcement. Momentum oscillators continue to trade in a bullish trajectory.