Gold Prices Rise on Dollar Weakness: Market Insights and Strategies Ahead of Fed Meeting

Gold prices showed a minor jump on board-based US dollar weakness. It hits a high of $2772  and currently trading around $2771.

Federal Reserve Prepares for January Meeting: Key Interest Rate Decisions Ahead

As the Federal Reserve prepares for its meeting on January 28-29, 2025, several critical things shape their decisions. At present, interest rates stand at between 4.25% and 4.5%, following a cumulative reduction of 100 basis points in late 2024. Now, the Fed is looking for only two cuts this year and a total of 50 basis points, against earlier plans of four cuts. Inflation is turning out to be more robust than the Fed had anticipated, and officials are hence being careful about further cuts. They need clear signs of economic weakness despite a strong job market. Financial markets expect the Fed not to cut rates during the upcoming meeting. Overall, the Federal Reserve is trying to manage inflation risks against the necessity of supporting growth. 

U.S. Flash Manufacturing PMI Signals Expansion After Months of Contraction

The U.S. flash manufacturing PMI for January 2025 reads at 50.1; this is above December's figure of 49.4 and the first since months of contraction showed signs of expansion, thereby a stabilization in the activity level. The improvement came from better new orders and output levels. However, the S&P Global U.S. PMI Composite Output Index declined to 52.4 from 55.4, with a slowdown in services sector activities struggling. While manufacturing continues to recover, mixed results in sectors reflect that uncertainties continue amidst inflation and shifting economic conditions.

Rate Pause Sentiments Climb

According to the CME Fed Watch tool, the chances of a rate pause in the Jan 29th 2025 meeting have increased to 99.50% up from 97.90% a week ago.

Technical Analysis: Key Levels and Trading Strategy

Gold prices are holding above short-term moving averages 34 EMA and 55 EMA and long-term moving averages (200 EMA) in the 4 hour chart. Immediate support is at $2745 and a break below this level will drag the yellow metal $2720/$2700/$2670/$2660/$2650/$2,630,$2600/ $2,570, $2,559, $2,536, and eventually $2,500. The near-term resistance is at $2775, with potential price targets at $2790/$2810. It  is good to buy on dips around $2725-27, with a stop-loss  at $2700 for a target price of $2790/$2810.