Gold threatening to break $1,300/oz ahead of FOMC

• Gold is on the brink of breaking the 1,300 level ahead of the FOMC statement slated this Wednesday at 18:00 GMT.
• The Federal Reserve is widely expected to keep rates on hold while telegraphing its willingness to hike rates in June.
• Investors are getting out of the non-yielding yellow metal to take advantage of higher interest rates.

Gold is trading at around $1,315 a troy ounce up 0.12% on Wednesday ahead of the imminent FOMC statement.

Gold has been trending down of late as market participants are anticipating that the Federal Reserve will keep its hawkish rhetoric in its statement which is scheduled to be released this Wednesday at 18:00 GMT. The Fed is widely expected to keep the target for the overnight rate on hold and to telegraph the market its willingness to hike in June of this year. 

USD demand is extremely strong as the US Dollar index (DXY) which measures the greenback relative to a basket of currencies is trading in the 92.60 region above 4-month highs. Generally speaking, the yellow metal is inversely correlated to the DXY and as if interest rates in the US are set to go higher investors will prefer to rotate their assets from the non-yielding gold to cash.

Gold daily chart 

Gold is on the brink of breaking a major support at 1,300. It is worth mentioning that gold is trading below its 200-period simple moving average which is the first time since December 25 of 2017. A clear break can lead the metal to the 1,285.72 level which is the 61.8% Fibonacci retracement from the December/January bull run. Further down the 1,260 previous demand level can be a potential support. To the upside investors will watch the 1,315.00 previous swing low and the 1,330 psychological level.