Forecast for the price of gold: XAU/USD fluctuates around $1,810 as attention turns to Fed policy

In the Tokyo session, the spot price of gold (XAU/USD) is fluctuating around the $1,810.00 immediate support. The price of the precious metal dropped after hitting a new five-month high on Tuesday at $1,824.51. After the publication of a moderate inflation report for the month of November, the price of gold was given new life.

As prospects of a lesser rate hike by the Fed have grown due to a decrease in inflationary pressures, the US Dollar Index (DXY) is battling to maintain above the 104.00 level. Following the weak October inflation report, Fed policymakers were already calling for a slowdown in the rate of interest rate increases. Recent major slowdowns in inflation have increased the likelihood of changing the monetary policy to one that is less hawkish.

After a decrease in pricing pressures, the risk-appetite theme boosted the S&P 500. Futures for the 500-US stock basket are anticipated to increase in speed as recession concerns have diminished more. Additionally, the 10-year US Treasury yields are now close to 3.50 percent.

"The 50 basis points raise, which is commonly predicted for tomorrow's FOMC meeting, can be considered almost certain given today's data," states a Commerzbank note. We continue to believe that the Fed will cut back on the extent of the rate increases once more at the start of 2023, increasing rates by only 25 basis points in February and March.