Despite the recovery, the technical picture for gold remains bearish. The inability to sustain prices above the retracement zone of $2607.35 to $2629.13 has created downward momentum. The next major support levels are at $2538.50 and $2536.85, and a break below this range could push gold towards the 200-day moving average at $2470.18. Furthermore, gold remains under pressure and is trading below its 50-day moving average of $2670.37, indicating continued selling pressure.
Federal Reserve warns of caution in interest rate cuts
The Federal Reserve’s latest policy update suggests two possible rate cuts in 2025, a slower pace than markets expected. Fed Chairman Jerome Powell stressed the importance of maintaining restrictive monetary policy to curb inflation, tempering expectations for a dovish turn.
Although Powell played down the likelihood of future rate hikes, his comments initially still put pressure on gold as the metal struggles in a high interest rate environment. However, gold rallied as traders assessed the broader implications of a gradual policy easing. Upcoming US GDP and inflation data, including the key PCE index, are likely to boost market sentiment in the near term.
Geopolitical risks and inflation concerns are driving support
Economic uncertainties, including a possible US government shutdown, have provided a supportive backdrop for gold. A prolonged shutdown could disrupt key government services and increase investor demand for safe haven assets. Elsewhere, the Bank of Japan held rates steady but signaled a potential tightening in 2025, a move that could impact global liquidity conditions and gold demand.
Market forecast
Gold prices are likely to face continued downward pressure in the near term, with momentum favoring a test of key support at $2536.85. A break below this level could mean a further decline towards $2470.18. However, any economic or geopolitical developments that increase uncertainty could limit losses and stimulate renewed demand for safe havens. For now, the outlook is bearish, with caution advised as markets await critical US economic data.
More information in our Economic Calendar.