Gold (XAU/USD) is trading around $3,392, affected by ongoing geopolitical tensions and anticipation of the Federal Reserve’s policy decisions. The price is slightly below $3,400, with limited movement as traders await guidance from the Fed. Recent U.S. economic data indicates a slowdown, with May housing starts dropping by 9.8% and initial jobless claims at 245,000, suggesting a cooling labor market. Analysts expect the Fed to keep rates between 4.25% and 4.50% in upcoming meetings, with a 58% chance of a rate cut in September.

The Fed’s Impact On Gold Market

The Fed’s Summary of Economic Projections will shed light on inflation, growth, and future rate paths, influencing gold’s outlook. New geopolitical tensions and central bank purchases strengthen gold as a hedge in uncertain markets. Technically, gold is holding above the 23.6% Fibonacci retracement level at $3,371.90. If it closes above $3,400, it could face resistance at $3,439–$3,452. The Relative Strength Index stands at 57, indicating solid momentum. Gold’s price is influenced by geopolitical events, interest rates, and U.S. dollar fluctuations. Central banks buy gold to support economies during turmoil, while investors seek it as a safe haven against currency depreciation and inflation. As gold settles just below $3,400, it’s clear that the commodity remains steady amid political anxiety abroad and caution domestically. The market is in a wait-and-see stance, reluctant to make moves until the Federal Reserve provides more clarity. The nearly 10% drop in housing starts and a slight rise in jobless claims are not just temporary. They suggest that the broader economy may be losing stability. If job trends continue downward and housing doesn’t recover, we can expect softer figures in the coming months. This matches the market’s pricing of a 58% likelihood that interest rates will lower in September.

Market Movement And Expectations

Powell and his team are likely to keep rates unchanged in the near future, which eases immediate pressure on gold from yield competition. Traders should closely watch the updated Summary of Economic Projections, especially the inflation and growth forecasts. These forecasts will influence expectations for monetary easing or tightening after summer. A hawkish stance might cause adjustments in positioning, while a dovish shift could revitalize buying interest in bullion. Recent demand from foreign central banks adds another support layer, as ongoing purchases show a desire to hedge against scenarios beyond just soft economic data. Although visibility is limited, the consistency of these purchases suggests increasing uncertainty about currency stability in various regions. From our perspective, the price structure looks favorable. Gold remains above the 23.6% Fibonacci level at $3,371.90, a level that has held during recent sell-offs. If the bulls can push through $3,400 and maintain their position, there is little technical resistance until $3,439–$3,452. Momentum indicators point higher, and with a Relative Strength Index around 57, the market isn’t overly stretched. We should be aware of how rate expectations and the dollar interact. A weaker dollar due to dovish Fed signals could boost gold’s appeal. Conversely, any stronger-than-expected inflation data or firm Fed language may limit short-term gains. Timing is crucial. For those trading precious metals derivatives, it’s wise to monitor yield curve movements as well. If long-term yields decline, the environment remains favorable for sustained upward movement. However, be prepared for sudden changes in forward guidance during upcoming speeches or data releases. Geopolitical risks also persist, providing a floor under gold’s price. Although difficult to quantify, the trend is that any flare-up increases buying interest, particularly from non-Western countries looking to reduce reliance on paper reserves. In summary, positioning strategies should remain adaptable. Now isn’t the time to fully abandon defensive strategies, but higher-conviction trades might wait until after the Fed’s next projections. Stay disciplined, keep risk managed, and monitor trading volumes at key support and resistance levels. Create your live VT Markets account and start trading now.

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