Market Spotlight: Gold Retreats as Fed Signals Cautious Approach

Gold pared some of its gains after a less dovish Fed rate cut. It hit a high of $2710 yesterday and now sitting around $2,687.

The U.S. Federal Reserve has announced a 25-basis-point (bps) cut in its main interest rate, bringing it down to a target range of 4.50% to 4.75%. All Fed officials unanimously supported this decision, showing that they all agreed with this move based on the current economic situation.

The Fed has indicated that while additional cuts may occur, they will depend on ongoing economic data, particularly regarding inflation and employment. Future cuts are expected in December 2024 and possibly into 2025 but with increased uncertainty due to possible inflationary pressures from proposed policies under President-elect Donald Trump. Markets eye Trump tariff and trade war with other countries for further yellow metal movement.

According to the CME Fed watch tool, the probability of a rate pause in Dec increased to 74.70%  from 69.90% a day ago.

Technical Overview:

Gold remains below both short-term and long-term moving averages on the 4-hour chart. The immediate support level is around $2650; a fall below this could lead to targets of $2632/$2600/$2590. A bearish trend would only be confirmed if prices drop below $2,470. On the upper side, minor resistance is found at $2,720, and breaking past this barrier could push prices up to $2735/$2760/$2775.

Current market indicators present bearish: the Commodity Channel Index (CCI) indicates a bearish trend, while the Average Directional Movement Index (ADX) suggests a neutral outlook.

Trading Strategy:

Consider making a sell on rallies around the 2,700 mark, with a stop-loss positioned around 2,730 and a target price of $2600.