Heading into the Fed showdown on Wednesday, gold is licking its wounds around $1,770. Will XAU/USD defend critical $1,765 support following Fed's decision? As FXStreet’s Dhwani Mehta notes, If the decision disappoints the hawks, gold could bounce off from this support.

Gold in bearish consolidation phase amid cautious market mood

“Investors prefer to remain on the sidelines and refrain from creating any fresh positions in XAU/USD, as they await the announcement on the pace of Fed’s tapering, which may pave the way for a mid-2022 rate hike. In the meantime, the Omicron covid updates, dynamics of the yields and the greenback will be closely followed for gold’s price action.”

“Gold sellers now look to take out the strong rising trendline support at $1,765 on a hawkish Fed outcome. The December lows of $1,762 will be next on the sellers’ radars, with deeper declines eyed towards the November lows of $1,759.”

“If the decision disappoints the hawks, then XAU/USD could bounce off from the $1,765 demand area once again, bringing the 100-DMA barrier at $1,790 back into play.”

“Acceptance above the 100-DMA on a daily closing basis is needed to challenge the 21, 50 and 200-DMAs confluence around $1,795. The next bullish target is seen at the $1,800 mark, above which a rally towards the November 30 highs of $1,808 will be on the cards.”