Gold Traders Brace for FOMC This Week

Middle East Tensions Driving Safe-Haven DemandGold prices are seeing a decent bid across early European trading on Monday. Traders are braced for an important week with the FOCM due on Wednesday. As trading begins, however, focus is on the rising tensions in the Middle East. News of fresh attacks on ships in the Red Sea, as well as the deaths of US soldiers in Jordan has stoked fears of escalating violence in the region. With many calling for a harsher response from the US in the wake of the drone attack on US troops, markets are dealing with plenty of uncertainty as we kick of the new week, driving safe-haven demand for gold.FOMC in FocusLooking ahead to the Fed this week, the stage is set of a volatile event. In light of the push-back we’ve heard from the Fed recently and on the back of a slew of better-than-forecast US data, the broad expectation is for the Fed to downplay near-term rate-cut prospects. However, given this backdrop, if the Fed gives any signal that rate cuts might still be seen ahead of the summer, this is likely to fuel a sharp unwinding of USD longs, sending gold prices higher near-term. On the other hand, if the Fed sticks to its recent message and pushes back against rate-cut forecasts, USD is likely to see a fresh bid, dragging gold lower near-term.Technical ViewsGoldFor now, the market remains underpinned by the local rising trend line, following the latest failure at the 2069.41 level. Below here, 1973.51 is the next support to note and an important barrier ahead of a deeper move down to 1871.04 next. Topside, 2069.41 is the level to break, opening the way to 2151.15 thereafter.