Gold fell on Wednesday but managed to recoup some of its losses ahead of the Federal Reserve's interest rate decision.
Gold is losing ground despite expectations that the Fed will leave interest rates unchanged in the range of 5.25% to 5.50%. At the same time, the U.S. central bank is likely to continue tightening policy as high household spending and strong labor market conditions keep the risk of rising inflation alive.
The Fed is expected to announce its policy decision during the U.S. session.
Fears of a weak Chinese economic recovery at the start of the fourth quarter are also weighing on the price of the popular precious metal, as China is the world's largest producer and consumer of gold.
Recent data from China missed forecasts and raised concerns about the outlook for the world's second-largest economy. China's manufacturing Purchasing Managers' Index (PMI) fell to 49.5 in October after rising to 50.2 in the previous month. The service PMI fell to 50.6 in the same period from 51.7 in October.
In addition, easing fears of war between Israel and Hamas is another factor weighing on gold bullion.
Hamas' promise to release hostages within days has reduced demand for safe-haven assets. However, active action by the Israeli Defense Force (IDF) against Hamas in the northern Gaza Strip is limiting gold's losses.
The US Dollar Index (DXY) reached 106.89 ahead of the Fed meeting, the ADP employment report, and the ISM manufacturing PMI for September.
It is worth noting that strong jobs and manufacturing data help strengthen the US dollar and push Treasury yields higher, allowing the U.S. central bank to keep interest rates high for longer.
Currently, the XAU/USD pair is trading at $1,983.94.
Gold is expected to attempt a correction and test support near the $1,965 level. In addition, the asset will show growth with a target above the $2,055 level. Cancellation of the growth option is a decline in the value of the asset and the breakdown of the support at $1,930.
Read also: How much will ETH cost by the end of 2023?