Gold Price Analysis: XAU/USD corrects 3-day rally, trades below $1,730
- XAU/USD gained more than $50 during the first half of the week.
- US Dollar Index stages a recovery following Wednesday's selloff.
- Wall Street looks to open the day sharply lower.
The XAU/USD pair, which closed the first two days of the week higher and rose nearly $30 during that period, rose sharply on Wednesday and touched a weekly high of $1,740. Following the three-day winning streak, the pair seems to have gone into a consolidation phase on Thursday and was last seen losing 0.62% on the day at $1,727.
The FOMC's dovish policy outlook and heightened concerns over the possibility of a second coronavirus wave crippling the US economy put the greenback under pressure and ramped up the demand for traditional safe-havens.
Commenting on the FOMC's policy statement and Chairman Jerome Powell's remarks, ANZ Bank analysts argued that gold appetite is likely to improve with the Fed reaffirming that low interest rates are here to stay.
"Chair Powell signalled that asset purchases would continue at the present pace or more, while rates will remain near zero through 2022,” ANZ analysts added. “The open-ended asset purchasing program gave comfort to those who have been worried that rising asset prices could curtail Fed buying."
Eyes on US stocks
After slumping to its lowest level in three months at 95.72 in the late American session on Wednesday, the US Dollar Index staged a rebound to make it difficult for XAU/USD to preserve its bullish momentum. At the moment, the index is up 0.26% on the day at 96.31.
In the second half of the day, the weekly Jobless Claims and Producer Price Index (PPI) data will be featured in the US economic docket. However, investors are likely to remain focused on Wall Street. At the moment, the S&P 500 futures are down nearly 2% on the day and a sharp drop witnessed in major equity indexes in the US could help the precious metal resilient against the USD.
Technical levels to watch for