Get Ready for a Market Reversal!
Gold is currently holding at a high level around the 4.3xx area, but its recent rise has been largely driven by speculation: the market has already believed the Fed will continue to cut interest rates next year. So, gold's rally isn't just because "gold is strong," but because of extremely dovish expectations for future interest rates. Once these expectations are disrupted, the market could very easily reverse.
On the other hand, several Fed officials have begun sending conflicting signals. Some say the Fed shouldn't rush to cut interest rates, that inflation is still too high, and that yesterday's economic data was also "somewhat damaged" due to the effects of the government shutdown. This means that there isn't a unified voice within the Fed itself. For gold, this creates a mixed situation: there's still hope for a rate cut, but there's also the risk that this dovish narrative will gradually be reduced.
Geopolitical tensions such as Russia-Ukraine and US-Venezuela tensions remain "additional fuel" for gold as a safe haven, but they are currently not the primary drivers. The market is much more sensitive to economic data and Fed statements. Moreover, speculators' positions in gold and silver are already quite "full" after the major rally; this means there's more room for profit-taking if there's a trigger.
Tomorrow and the next few days, major data releases (such as employment data, inflation, and central bank events) could trigger new "shocks." If the data is weaker than expected, the market could become more convinced that the Fed will cut interest rates more aggressively, → gold could continue to rise, even trying to break a new record. However, if the data is stronger, the market could quickly revise its expectations: "Hey, maybe the cut won't be that big," and gold could potentially experience a sharp correction.
So, from a macro perspective, gold is currently still in an uptrend, but the risk-reward ratio is no longer as generous as before. Above here, the movement becomes more "sharp in both directions"—rises can be rapid, but declines can also be painful if the Fed's narrative changes even slightly. For traders, this is a phase where money management and patiently waiting for confirmation are far more important than FOMO chasing high prices.
Furthermore, this is the time to be more cautious than euphoric. This doesn't mean we're immediately bearish on gold, but we must be aware that a rally fueled by interest rate speculation is fragile if data doesn't match the scenario. Simply put, investors can still be optimistic, but don't be surprised if the market suddenly slows down or even reverses direction in the next day or two just because of a single data release that "deviates" from expectations. (asd)
Source: Newsmaker.id
