XAU/USD loses luster, approaches $2,600

XAU/USD Current Price: $2,609.43

• FOMC meeting minutes and Fedspeak are the focus of the American afternoon.
• Market sentiment soured amid talk US authorities could seek a Google bailout.
• XAU/USD is pushing weekly lows and gaining near-term downside traction.

Spot gold fell to $2,604.66 on Tuesday, recovering modestly afterwards. The XAU/USD pair is nearing such an early US session low as investors await the minutes of the Federal Open Market Committee (FOMC) meeting and Fedspeak.

The hope that the document can shed new light on future monetary policy seems unwarranted, however. A lot of water has gone under the bridge since the Fed announced a 50 basis point (bps) interest rate cut when it met in September.

The most notable game-changer was the latest non-farm payrolls (NFP) report, which showed the country added more than 250,000 new jobs in September and the unemployment rate fell to 4.1% from 4.2% previously. Following the announcement, market participants trimmed bets on a potential 50 bps rate cut in November, helping the US dollar regain its balance.

The FOMC minutes will reflect policymakers’ thoughts ahead of solid employment data. As for the Fed speakers, most have already hit the post-Fed wire and are unlikely to offer any comments different from those already heard.

Meanwhile, markets are in a risk-off mood. Declining enthusiasm for Chinese stimulus has weighed on local equity markets, while news that the US Justice Department is considering a possible breakup of Google also weighed on stock markets. Trading on Wall Street is mixed, with only the S&P 500 holding on to modest gains.

XAU/USD Short Term Technical Outlook

The daily chart of the XAU/USD pair shows that it has declined for the sixth consecutive day with increased bearish potential. Technical indicators are offering firmly bearish slopes, albeit still above their median line, while the shiny metal is currently developing below a still bullish simple moving average (SMA) of 20. The 100 and 200 SMAs, meanwhile, remain well below the current level, maintaining their upward slope.

In the short term, and according to the 4-hour chart, the bearish case is stronger. A bearish 20 SMA is about to break below a mostly flat 100 SMA, both around 2,635. Technical indicators, meanwhile, have accelerated south into negative territory, consistent with continued selling pressure.

Support levels: 2,603.90 2,589.10 2,575.20

Resistance levels: 2,625.40 2,637.10 2,652.90