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Gold rallies to fresh 5-month high above $1255 on USD weakness

  • US Dollar Index extends losses ahead of the Fed announcements.
  • The Fed is expected to hike policy rate by 25 bps.
  • Wall Street rebounds to show improved market sentiment.

The XAU/USD pair extended its rally in the second half of the day and touched its highest level since early July at $1258 before retreating slightly. As of writing, the pair was up 0.45%, or $5.5, on the day at $1255.

The pair's latest leg up seems to be fueled by a broad-based selling pressure surrounding the greenback. Although there were no clear catalysts that may have caused a sell-off, the cautious stance ahead of the Fed's policy announcements seems to be weighing on the currency. Today's mixed macroeconomic data releases from the U.S. couldn't help the dollar recover its losses. At the moment, the US Dollar Index is down 0.3% on a daily basis at 96.70.

  • US: Existing home sales increased 1.9% in November vs. -0.6% expected.
  • US: Current account deficit increased to $124.8 billion in Q3.

Previewing the FOMC meeting, "The new FOMC projections – to be released on December 19 – are likely to reflect the deterioration that we have seen so far. However, if the FOMC participants will remove only one of the three hikes for 2019, that would still leave the dot plot with one more hike than markets are currently expecting for next year," Rabobank analysts said.

  • FOMC Preview: What 9 major banks are expecting from December meeting?

On the other hand, Wall Street decisive rebound today suggests a higher risk appetite in the session, which makes it difficult for the pair to push higher for the time being.

Technical levels to consider

The initial resistance for the pair aligns at $1258 (daily high) ahead of $1265 (Jul. 9 high) and $1272 (Jun. 25 high). On the downside, supports could be seen at $1246 (daily low), $1237 (200-DMA) and $1229 (50-DMA).

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