The price of gold (XAU/USD) has remained weak in the Asian early session this Tuesday, fluctuating around $4195 per ounce. The market generally expects the Federal Reserve to announce a 25 basis point rate cut at this week's meeting, but more importantly, whether the monetary policy statement and dot plot will release hawkish signals.
If the Federal Reserve hints that the pace of future rate cuts will be limited, it could drive the dollar to rebound temporarily, thereby putting pressure on gold priced in dollars. Market data shows that investor bets on this rate cut have significantly increased.
According to the latest tool monitoring, the probability of a rate cut has quickly risen from 66% last month to the current 90%, indicating a high expectation for an easing path in the market. However, if the Federal Reserve emphasizes economic resilience or inflation stickiness while cutting rates, resulting in what is known as a 'hawkish rate cut', the short-term trend for gold may still remain weak.
"The market is waiting for the Federal Reserve's final decision and hopes to gain clearer policy direction from the statement." — Peter Grant, Vice President and Precious Metals Strategist at Zaner Metals
On the data front, the U.S. employment report will be released before the interest rate decision. This includes the ADP four-week average and JOLTS job vacancy data, especially the hiring situation for September and October.
Analysts point out that if data performance is weak, it will strengthen market expectations for more room for interest rate cuts and indirectly enhance the appeal of gold. This is because the opportunity cost of holding non-yielding assets such as gold will significantly decrease in a lower interest rate environment.
In addition, the uncertain factors in the global situation also provide potential support for the price of gold. As new frictions arise in the relationships between some countries, the appeal of safe-haven assets is rising. Markets usually reassess risk exposure when uncertainty increases, thereby increasing the allocation ratio of traditional safe-haven assets like gold.
From the daily structure of gold, the price has retreated continuously after touching resistance above $4250, forming a slight adjustment pattern. The current candlestick combination shows that upward momentum has slowed, and short-term moving averages are beginning to trend horizontally, reflecting that the market is in a phase of waiting for policy direction.
The MACD histogram shows reduced momentum, with early signs of a downward crossover between the fast line and slow line, indicating that the short-term trend may continue to oscillate weakly. If the gold price continues to fall below the support of $4180, it may further test the range of $4155 to $4120.
Conversely, if the Federal Reserve signals more easing, the gold price is expected to re-challenge the daily resistance zone of $4220 to $4250.
