Gold prices are under pressure as markets assess the possibility that the Fed may eventually scale back its stimulus policy at its meeting this week. Lukman Otunuga, a senior research analyst at FXTM, said precious metals prices collapsed like a building tower yesterday because of fears that the Fed would point the way out of emergency stimulus measures. The final closing of precious metals prices this week will be greatly affected by the outcome of tomorrow's Fed meeting.

The Fed has repeatedly said the current price surge is temporary, but at its two-day meeting, which ends on Wednesday, policymakers are likely to discuss initially when and how quickly to scale back its massive bond-buying programme to combat inflation. "there is growing nervousness about rising inflation and the precious metals market feels that central banks must start to respond more positively to these inflationary pressures," said Edward Meir, an analyst at Ed&F Man Capital Markets. The dollar index rose to an one-month high of 90.67 on Tuesday on expectations that the Fed could be hawkish, putting more pressure on gold prices.

The Fed is widely expected to sit tight on the decision. The Fed is likely to announce cuts in August or September and begin to implement them early next year, while interest rate increases may be advanced to 2023. The Fed will also release a bitmap and economic forecasts at the meeting, and the Fed is likely to revise GDP growth in 2021, compared with a 6.5 per cent forecast in March.

Gold has fallen three times in a row and has fallen below the upward trend line since the end of March, increasing short-term downside risks. From a technical point of view, the bullish market seems unsustainable. The high position of MACD forms a dead fork, and the RSI is below 50. The important support below is near 1850, and if it effectively falls below the support near 1850 within a day, it may attract more bears to enter the market in the future. Further support below 1850 focuses on the 200-day moving average of 1840.21 and the 50-day moving average of 1831.33. The initial resistance above is focused on 1872.24 of the 5-day moving average, 1880.42 of the 10-day moving average, and 1892.58 of the retracement position of 76.4%.

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