Gold Strengthens Above $4,200, Markets Cautious Ahead of Fed Decision
Gold prices moved steadily with an upward trend at the start of this week, holding above the psychological level of US$4,200 per troy ounce during the Asian session. Market participants continue to consider this precious metal a primary choice ahead of the highly anticipated US Federal Reserve (Fed) interest rate decision this week. Strong expectations that the Fed will cut interest rates by another 25 basis points are a key driver of gold's movement, amid a weakening US dollar and signs of slowing US economic performance.
Fundamentally, gold is benefiting from a combination of factors: the prospect of lower interest rates, a weakening US dollar, and concerns about a global economic slowdown. Relatively benign PCE-based inflation data provides room for the Fed to ease policy without undue pressure. At the same time, geopolitical uncertainty and global economic risks are leading investors to return to gold as a safe haven. This condition maintains an overall positive bias for gold, although volatility remains wide ahead of the official Fed announcement and Fed Chairman Jerome Powell's press conference.
Technically, gold's current movement can be categorized as sideways bullish. Prices are still holding comfortably above the US$4,190–US$4,200 zone, which serves as important intraday support. As long as this area is not breached below, the short-term trend structure is considered to favor buyers. On the other hand, the market is also eyeing the US$4,230–US$4,260 area as the nearest resistance. If this level is successfully broken and maintained, the opportunity to test the higher range around US$4,300–US$4,350 will be wide open.
However, if gold fails to maintain the US$4,190–US$4,200 area and greater selling pressure arises, the correction could potentially extend towards US$4,150 or even US$4,100 as the next test zone. This scenario could occur if the Fed delivers a more cautious or hawkish message, for example, emphasizing that further interest rate cuts will be highly data-dependent and will not be aggressive. Under such conditions, some market participants may choose to take profits after gold's sharp rally in recent weeks.
For now, gold is in a "waiting" phase awaiting new triggers from the US central bank. Powell's statement and the Fed's latest economic projections will be key to its next move: whether gold's strengthening trend continues with the support of lower interest rates, or whether it enters a healthy correction phase before resuming its medium-term trend. For investors and traders, risk management is crucial in this phase, given gold's highly sensitive to any changes in the Fed's policy tone.
Source: Newsmaker.id
