Gold Retreats, Dollar Rebounds Ahead of the Fed
Gold prices (XAU/USD) fell steadily in the first half of the European session on Wednesday (September 17th), briefly slipping below $3,665—setting a daily low. The strengthening of the US dollar from its weakest level since early July due to repositioning ahead of the FOMC decision weighed on gold's performance and ended a three-day rally toward a record set on Tuesday.
Despite the pressure, gold's decline remained contained. Market participants were repositioning ahead of the policy announcement, so movements tended to be volatile. The recovering dollar exerted short-term pressure, but room for further strengthening in the greenback was expected to be limited.
Market expectations are now tilted toward the Fed continuing its interest rate cut cycle today, with the possibility of two more cuts by the end of the year given signs of labor market weakness. The prospect of lower interest rates typically restrains dollar strength and can be a support for non-yielding assets like gold.
Beyond interest rates, geopolitical tensions—from the Russia-Ukraine war to conflicts in the Middle East—maintain hedging interest. This is a reason for gold bears to remain cautious, as risk headlines can quickly shift sentiment.
Bottom line: gold is correcting in the short term due to the dollar's rebound and repositioning ahead of the FOMC, but fundamental support from interest rate cut expectations and geopolitical risks could potentially limit the downside. The next direction will largely be determined by the tone of the Fed's statement—the more dovish it is, the greater the chance gold will retest its peak. (ayu)
Source: Bloomberg.com
