Gold Analysis: Waiting for the Fed!

Sep 18

Gold prices attracted buying after a brief overnight corrective drop, finding support due to expectations of a 50 basis point rate cut by the Fed. This limits the attempted recovery of the US Dollar (USD) and supports the precious metal, although buyers seem reluctant to place aggressive bets ahead of key central bank events. Immediate resistance is at the all-time high of $2,590, with a test of the psychological level of $2,600 if surpassed. Acceptance above this level could open the door to the next target of $2,650. On the other hand, if the Fed disappoints market expectations for a more accommodative stance, gold could face a fresh wave of selling. In that case, the price could drop towards $2,532 and $2,500. The Fed's decision on Wednesday represents a crucial point for the future direction of gold. Markets currently estimate a 65% probability of a 50 basis point rate cut, and the weakness of the US Dollar could continue to provide fundamental support for gold. However, if the Fed opts for a more moderate 25 basis point cut, the dollar could see an immediate upward reaction. More important than the decision itself will be the Fed’s communication, including Jerome Powell's words and the Dot Plot, which will provide guidance on future policy.