Gold (XAU/USD) has formed a symmetrical triangle pattern on the 1-hour chart, consolidating its recent decline at 1,906. At time of writing, gold is trading at 1,925, above the 21 SMA and above the triangle pattern.
Gold appears to be consolidating amid an improvement in risk sentiment in the market. The improving sentiment comes on hopes for a diplomatic solution to the war between Russia and Ukraine.
Therefore, it seems that investors prefer to wait before opening new positions in gold. The long-awaited event anticipated by investors for several months is the increase in the US federal funds rate.
In the afternoon of the American session, the Federal Reserve will announce the decision on interest rates.
The Fed is widely expected to make its first-rate hike of 25 basis points since the pandemic began. This movement is already assumed in the price of the markets, so all attention will be focused on the forecast of economic growth and inflation and on the speech of Fed Chairman Jerome Powell.
Strong volatility is expected in gold in the coming hours. So, we should be very careful and only buy the asset if the price consolidates above 1,910 or above the 21 SMA. The target that gold could hit in the coming hours will be the 200 EMA zone around 1,957 or the top of the downtrend channel around 1,950.
Conversely, a break and consolidation below the symmetrical triangle around 1,909 could accelerate the bearish move and the price could quickly reach support of 6/8 Murray located at 1,875.
Since yesterday, the eagle indicator has been giving an oversold signal and it is likely that in the next few hours there will be an imminent bounce towards 1,957 and gold could reach 8/8 Murray at the psychological level of $2,000.
