Gold prices are seeing a slight bounce after hitting a multi-week low, but the momentum doesn’t have a lot of strength behind it. The growing belief that the Federal Reserve will opt for a smaller 25 basis point rate cut in November is giving support to the US Dollar, which in turn is keeping a lid on gold’s gains. Traders are now waiting for the upcoming US Consumer Price Index (CPI) report to get a better sense of where things are headed.
Gold (XAU/USD) has been hovering around the $2,605-$2,604 mark, which was tested recently, but the upward movement seems limited. The US Dollar has climbed to an eight-week high as the market has largely dismissed the idea of another major interest rate cut from the Fed. In addition, higher US treasury bond yields are making it hard for gold— which doesn’t generate interest— to gain much traction.
That being said, the fact that gold has repeatedly bounced off the $2,600 mark this week is causing some hesitation before investors make any big bearish moves. Many traders are waiting to see the US inflation numbers before making strong bets, as the CPI report could shift expectations for future Fed decisions and, in turn, impact the demand for the USD and gold.
Market Overview :
Gold bulls are staying cautious amid reduced expectations for Fed rate cuts and a stronger US Dollar. Minutes from the September Federal Open Market Committee (FOMC) meeting revealed that while most members supported a 50 basis point rate cut, some would have preferred a smaller 25 bps reduction, pointing to ongoing inflation concerns and strong economic data, including a low unemployment rate. The committee agreed that the bigger rate cut did not lock the Fed into a specific pace for future cuts, which boosted the US Dollar to its highest in nearly two months.
Several key Fed members shared their views:
- Dallas Fed President Lorie Logan pointed out uncertainties in the economic outlook but favored smaller cuts moving forward.
- Boston Fed President Susan Collins emphasized the data-driven nature of policy decisions.
- San Francisco Fed President Mary Daly mentioned that one or two more rate cuts could happen this year, while stressing that the September cut doesn’t necessarily set the tone for future cuts.
Currently, the market is pricing in a higher likelihood of a 25 bps cut in November, with a small chance (just over 20%) that rates could be kept steady. Meanwhile, bond yields—both the two-year and the ten-year—continue to rise, adding further pressure to gold prices.
Geopolitical concerns, such as rising tensions between Israel and Iran, are keeping some interest in safe-haven assets like gold, but investors are mostly in a holding pattern ahead of the key US inflation report.
Technical Outlook:
From a technical standpoint, the recent dip below $2,630 has caught the attention of bearish traders. However, while gold’s price has struggled, it has managed to stay above the $2,600 mark for now. Oscillators are still in positive territory, so it’s wise to wait for a clear break below $2,600 before assuming the price will continue to fall. If that happens, the next target could be around $2,560, with a potential drop to the $2,530 region and eventually $2,500.
On the flip side, if gold starts to recover, it could face resistance around the $2,630-$2,635 area. A sustained move beyond that could bring prices up to the $2,657-$2,658 range, and possibly as high as $2,670-$2,672. If momentum builds, bulls might even push for a retest of the all-time high near $2,685-$2,686, with the $2,700 mark serving as the next major target.
