Treasury ETF shorts shift toward belly ahead of Fed decision

The price of gold (XAU/USD) has been holding steady below the $4,350 mark on Wednesday as investors exercise caution before the Federal Reserve's monetary policy announcement. A slight decline in the US Dollar offers some support to the precious metal, though soaring US Treasury yields curtail its upside potential. The Federal Reserve is anticipated to lift interest rates by 25 basis points at the conclusion of Wednesday's meeting, with particular focus on the updated economic forecasts, the dot plot, and comments from Fed Chair Kevin Warsh.

Tensions in the Middle East and the risk of disruptions to oil supplies are inflating inflationary pressures and demand for safe-haven assets, providing a boost to gold prices despite higher US yields and the possibility of further tightening by the Fed. In the daily chart, XAU/USD trades at $4,341.86, hovering just above the 100-day simple moving average ($4,326.81) but bounded by the 200-day SMA near $4,540.24 and the broader bearish resistance structure, pointing to a neutral to mildly bearish outlook.

The Relative Strength Index (14) near 48 indicates a lack of strong directional momentum, implying price is consolidating rather than displaying a clear trend. The immediate resistance on the upside lies at the 200-day SMA around $4,540.24, with a stronger barrier near the horizontal resistance around $4,697.48, while the bearish trend line also plays a role.

On the downside, support is found in the latest low at $4,253.78, and a break below this level would expose the more extensive horizontal support near $3,945, where buyers would attempt to regain control. In the one-hour chart, the metal is displaying a neutral to slightly bullish bias as it trades above the 100-period simple moving average near $4,324, yet it remains restrained below the 200-period SMA around $4,371 and the descending resistance trend line close to $4,361.

A strong Relative Strength Index (RSI) around 64 suggests bullish momentum is developing, but the pair still needs to surmount these nearby overhead barriers to trigger a stronger uptrend.