- Summary:
- The Fed will announce new interest rates on Wednesday, but here's why there's little room for gold price gains whether it's 50 or 25 bps cut.
Gold price settled lower on Tuesday, stepping down from Monday’s all-time high as traders waited for Fed interest rate decision. The commodity traded at $2,570 per ounce at the time of writing, having declined by 0.4 percent on the daily chart. The CME FedWatch tool reported that the percentage of traders expecting a 50 basis points cut had risen to 59 percent from 34 percent a week earlier, which could explain gold’s sharp rise in the last week.
The Federal Reserve will announce its decision on Wednesday, and it is likely that most traders will tame their appetite for gold during the intervening period. In addition, recent gains by gold price means many traders could have locked in their profits based on the rising prospect of a 50 basis points cut.
Therefore, if that turns out to be true, then gold price likely has a small headroom. Furthermore, a 25 basis point cut could bring greater downward pressure on the gold price. Also, markets have rallied this year, and there were already fears in August that the rise was not based on the true state of fundamentals.
For example, stock markets flashed implosion signals when it appeared that Nvidia and AI tech as a whole could have been overvalued. Therefore, investors are likely to walk on eggshells this time, regardless of how deep the Fed interest rates go. That will limit the upside for gold price in the near-term.
Gold price forecast today
Gold price is on a downward momentum as indicated by the RSI indicator, and the buyers will be in control if resistance stays at 2,570. That will likely establish the first support at 2,560, but a break below that mark could clear the path for further downside to test 2.551.
Conversely, a move above 2,570 will hand over control to the buyers, with initial resistance likely to be 2,579. If the upward momentum breaks above that level, it could strengthen the upside action to test 2,585. Also, that will invalidate the downside narrative.
