Gold Rally Pauses, Focus Shifts to FOMC

Gold Under Pressure on MondayGold prices are slipping on Monday, putting a pause on the more than 10% rally we’ve seen in gold over the last month. The selling comes despite news of Israel stepping up its invasion of Gaza this weekend through intensified land and air attacks. For now, the main focus seems to be on the fact that the conflict isn’t spilling over into a wide Middle East war. However, while that is the case for now, the risk of such an outcome remains very present and gold prices are subject to plenty of upside risks in coming weeks and months as the conflict continues.Will Powell Push Gold Lower?The FOMC will also be closely watched this week. With recent US data surprising on the upside, traders are wary of hawkish risks. In particular, the market will be assessing the Fed’s latest outlook and whether further tightening will be needed. Powell recently remarked on the impact rising bond yields were having on financial conditions, making the need for further Fed tightening less urgent. If Powell reiterates this message, USD is likely to come off through the back end of the week, allowing gold prices to recover. However, if Powell is seen taking a more hawkish view in light of recent data strength, this will likely weigh on gold prices near-term.Technical ViewsGoldThe rally in gold prices has stalled for now on the break above 1973.51. While this level holds below as support, the focus is on a continuation higher in line with 2069.41 the next objective for bulls. We are seeing some bearish divergence in momentum studies, however, suggesting risk of a deeper pullback. Only a break below the 1973.51 level will negate the bearish view. Worth noting too that we have an active buy signal in the Signal Centre today set at 1994 targeting a move back up through 2033.