Gold is trading in a range between $1,970 and $1,960 on Wednesday as investors are inactive ahead of Federal Reserve (Fed) Chairman Jerome Powell's speech.
Markets are concerned about recent comments from Fed officials that have indicated support for further monetary tightening to reduce inflation.
Michelle Bowman, a member of the Federal Reserve Board of Governors, said she supports measures to raise interest rates to ensure that consumer inflation returns to 2% in a timely manner. Neel Kashkari, head of the Minneapolis Fed, also believes that more efforts are needed to prevent inflation from rising again.
The U.S. Dollar Index (DXY) is at 105.7, indicating increased interest in the asset. Demand for the U.S. dollar has increased on fears that the Federal Reserve will resume interest rate hikes to ensure price stability.
The main factor limiting gold's losses is the ongoing tensions in the Middle East, as the Israeli army began storming Hamas tunnels in the Gaza Strip.
In addition, precious metals market experts at ANZ Bank believe that gold is being supported by purchases by major central banks to bolster their foreign exchange reserves.
"Active central bank buying remains supportive. According to official data, China added to its gold reserves in October, the 12th consecutive month of additions, with its holdings rising by around 740,000 ounces. This brings the total reserves to 2,215 tons," experts said in a statement.
Currently, the XAU/USD pair is down 0.24% to trade at $1,964.22.
If the price of gold continues to fall, it may find support at the $1,950 level, a break of which will bring the asset down to the $1,930 area. If gold resumes its growth, it will encounter resistance at $1,980, overcoming which will open the way to $1,920 and higher.
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