Gold Prices Drop Despite Fed Interest Rate Cut, Here's Why!
Global gold prices are under pressure after the Federal Reserve (The Fed) cut its benchmark interest rate. This situation has raised some questions among investors, considering that lower interest rates generally support the rise of precious metals.
Analysts explained that the decline in gold prices was due to several fundamental factors. First, the market had long anticipated the decision to cut interest rates. Gold's rally in recent weeks prompted investors to take profits when the announcement finally met expectations.
Furthermore, Fed Chairman Jerome Powell's cautious tone also weighed on sentiment. Powell emphasized that this move was not the beginning of a long cycle of interest rate cuts, thus reducing expectations for further cuts. This statement pushed bond yields up and the US dollar stronger, two factors that typically weigh on gold.
Risk-on sentiment also influenced the movement. The market viewed the interest rate cut as a positive signal for economic growth prospects, prompting investors to shift to riskier assets such as stocks. As a result, interest in safe-haven assets like gold declined.
"The pressure on gold this time is largely driven by market psychology. Although the interest rate cut should have been positive, profit-taking, the strengthening dollar, and the Fed's hawkish tone have actually caused the price to correct," said a commodity analyst.
The price of gold (XAU/USD) has corrected after hitting a record high around $3,700. It is currently testing key support in the $3,660-$3,645 range, where technical indicators such as short-term moving averages provide support. However, momentum has begun to weaken following overbought conditions, so if this support is broken, the price could potentially fall further to the $3,620-$3,600 area. Conversely, if gold is able to hold and rebound from the support, it has the potential to retest the $3,700-$3,720 resistance as a short-term upside target.
Going forward, market participants will be closely monitoring inflation data and comments from Fed officials to gauge the direction of future policy. If expectations of additional cuts strengthen, gold could potentially find support, but for now, the price remains vulnerable to selling pressure.
Source: Newsmaker.id
