Gold Price Analysis: XAU/USD retreats from 1-week tops, steady around $1855 ahead of FOMC

• Gold struggled to capitalize on its intraday positive move to one-week tops.
• A sharp rebound in the US bond yields exerted some pressure on the metal.
• Sustained USD selling helped limit the downside ahead of the FOMC decision.

Gold surrendered its intraday gains to one-week tops and has now retreated to the lower end of its daily trading range. The commodity was last seen hovering near the $1855 region, nearly unchanged for the day.

The US dollar prolonged its recent bearish trend and tumbled to fresh two-and-half-year lows amid firming expectations for additional US fiscal stimulus. This, in turn, allowed the dollar-denominated commodity to build on the overnight positive move and gain some follow-through traction through the first half of the trading action on Wednesday.

The USD remained depressed and failed to gain any respite following the disappointing release of US monthly Retail Sales figures. In fact, the headline sales declined by 1.1% in November as against the 0.3% fall anticipated. Adding to this, sales excluding autos also fell short of market expectations and declined by 0.9% during the reported month.

In the latest US stimulus headlines, reports indicate that the US Congress is on the brink of agreeing on a $900 billion coronavirus rescue package and the deal could come as early as on Wednesday. The headlines led to a sharp rebound in the US Treasury bond yields, which seemed to be the only factor that prompted some selling around the non-yielding yellow metal.

Apart from this, the pullback could further be attributed to some repositioning trade ahead of the key event risk – the latest FOMC monetary policy update. The Fed is scheduled to announce its decision later during the US session. This, along with the policy outlook, will assist investors to determine the next leg of a directional move for the XAU/USD.

Technical levels to watch