Gold Price Forecast: XAU/USD surrenders intraday gains, focus remains on FOMC

• Gold extended its range-bound price action through the early North American session.
• A goodish pickup in the US bond yields benefitted the USD and capped the early uptick.
• COVID-19 jitters extended some support to the safe-haven metal ahead of the FOMC.

Gold refreshed daily lows heading into the North American session, albeit quickly recovered a bit thereafter. Currently hovering around the $1,800 mark, the XAU/USD struggled to capitalize on its modest intraday gains to the $1,807 area and was capped by a combination of factors. The US dollar was back in demand amid a goodish pickup in the US Treasury bond yields, which, in turn, acted as a headwind for the non-yielding yellow metal.

The USD uptick could further be attributed to some repositioning trade ahead of the highly-anticipated FOMC monetary policy decision, scheduled to be announced later during the US session. Market players will look for clues on the timing of tapering amid surging inflation in the US. This will play a key role in influencing the near-term trajectory for the greenback and provided a fresh directional impetus to the dollar-denominated commodity.

Meanwhile, investors remain worried about the potential economic fallout from the spread of the highly contagious Delta variant of the coronavirus. This, to a larger extent, helped offset the negative factors and helped limit any meaningful slide for the traditional safe-haven gold. Investors also seemed reluctant heading into the FOMC event risk, warranting some caution before placing any aggressive directional bets.

Even from a technical perspective, the XAU/USD has been oscillating in a familiar trading range over the past one week or so. The downside remains cushioned near the $1,790 horizontal support, which should now act as a pivotal point for short-term traders. Given the recent failure near the very important 200-day SMA, a convincing break below might trigger some technical selling and pave the way for some near-term depreciating move.

On the upside, the $1,808-10 region now seems to have emerged as immediate strong resistance. A sustained strength beyond is likely to push spot prices back closer to the 200-day SMA, currently around the $1,822-23 region. Some follow-through buying will be seen as a fresh trigger for bullish traders and pave the way for a move towards monthly swing highs, around the $1,834 area, en-route the next relevant hurdle near the $1,850-52 zone.