GOLD Analysis
Afternoon: Gold Faces Struggle Amid Federal Reserve's Gradual Easing Strategy
Highlights:
- Federal Reserve cut interest rates by 50 basis points with another reduction expected by year-end.
- Powell indicated no signs of a recession and emphasized a gradual approach to further rate cuts.
- Traders anticipate a 68% chance of a 25-bp cut in November and a 32% likelihood of a 50-bp cut.
Overview:
Gold prices fluctuated as markets absorbed comments from Federal Reserve Chair Jerome Powell following the U.S. central bank’s significant rate cut. The Fed initiated a gradual easing of monetary policy by reducing interest rates by half a percentage point, marking the largest cut in several years. Despite the cut, Powell emphasized that there are no imminent signs of a recession or a severe economic downturn, indicating the Fed's approach remains cautious and steady. He further clarified that the central bank would continue to lower rates but without urgency, aligning moves with broader economic indicators.
Traders are now shifting focus to future rate cuts, with market expectations reflecting a 68% chance of a 25 basis-point reduction in November and a 32% possibility of a more aggressive 50-bp cut, as per the CME FedWatch tool. While the current cut was substantial, Powell's comments reinforced the idea that the Fed is taking a measured approach, which may limit further immediate action unless economic conditions worsen significantly.
Gold investors are left in a state of uncertainty as the precious metal typically benefits from lower rates but is facing limited momentum due to the Fed’s cautious stance.
Key Data to Watch:
- Euro Zone: Current Account
- UK: Bank of England Policy Meeting
- US: Unemployment Claims, Philly Fed Manufacturing Index, Existing Home Sales
Technical Outlook:
Gold prices are trading around a key resistance level and could break higher if further rate cuts materialize. However, as Powell’s comments suggest a slow easing pace, traders should be prepared for potential short-term consolidation.
Actionable Strategy:
Buy on dips till 2568 targeting 2600 which invalidates below 2535.
Support and Resistance Levels:
