XAU/USD: Gold Dives Under $3,380 as Traders Brace for Fed Decision — Here’s What to Expect

A hold paired with market-moving guidance is likely to sway gold bugs today as Fed’s Powell takes the stage for the regular rate update.

📌 Bullion Flat and Patient

• Gold prices XAUUSD slipped early Wednesday, floating under $3,380 per ounce as traders were getting ready for some market-moving vibes and trading opportunities.
• It’s Fed day today and that means one thing — time for Federal Reserve boss Jay Powell to get in front of the camera while we all stay glued to the monitors, anticipating the latest moves on the charts.
• Gold, as an asset that’s sensitive to rate decisions, has quieted down ahead of the big event — the hold-your-breath pattern usually happens right before a big thing is about to drop and make a splash.

⏰ A Day in the Life of Gold

• And today may bring just that — the Fed is expected to hold interest rates steady in efforts to help inflation slide lower, ideally to the 2% target. But there’s also the other Fed mandate where the central bank needs to do its best in keeping employment levels at maximum.
• And while a lower rate may help expand the economy and incentivize employers to staff up, it may reignite inflation pressures and lead to economic complications down the road.
• Hence the rate hold (already priced in) isn’t expected to be the thunder. Rather, it’s Powell’s message after the announcement — a dovish tone could suggest a rate is around the corner. But a hawkish commentary may rattle markets left and right.

👀 The Broader View

• So where’s gold in all that and what role does it play? Gold doesn’t generate any yield — it’s simply an asset that either appreciates or depreciates given the circumstances. In a low-rate environment, gold gets more attractive as the opportunity cost drops — fixed-income assets get less attractive (i.e. dollar returns a lower yield).
• This week hasn’t been too good for gold, which has lost about 1.5% from its valuation since its Monday peak, sliding from near-record prices around $3,450 per ounce.
• Last week, for one, was a great time to be in the shiny metal after Israel struck Iran with dozens of missiles, flaring up war tensions and leading to a surge in the price of gold, which acts as a safe haven in times of broad (and especially scary) uncertainty.