Gold Price Forecast: Drops to $2,655 Amid Dollar Surge—Bullish Reversal Above $2,640?
Gold prices dropped to a three-week low on Thursday, pressured by a strengthening dollar after Donald Trump’s U.S. election win.
Spot gold (XAU/USD) slipped to $2,655 as investors moved toward the dollar, which hit a four-month high, making gold more expensive for buyers using other currencies.
With global attention on the Federal Reserve’s anticipated interest rate decision, analysts predict that the Fed may adopt a cautious approach to future rate cuts, depending on potential inflationary effects of Trump’s fiscal policies.
Rabobank 1/3: today is a #Fed meeting decision day. The consensus is still another 25bp cut to take Fed Funds to 4.75%, despite the surge in long bond yields, stocks at a record high, Bitcoin at a record high, and gold close to one; and the strong Q3 GDP print,
— Francesc Riverola – FXStreet.com (@Francesc_Forex) November 7, 2024
The dollar index (.DXY) rose significantly as Trump reclaimed the White House, leading to questions over whether the Fed will take a slower approach to rate cuts amid fiscal policy shifts.
According to Kelvin Wong, Senior Market Analyst at OANDA, Trump’s policy plans, which could increase inflation, may cause the Fed to reduce rates at a slower pace. However, he also noted that a widening U.S. budget deficit might create favorable conditions for gold in the longer term.
Federal Reserve’s Policy Outlook: Key Factor for Gold’s Path
Later today, the Fed is widely expected to announce a 25-basis-point rate cut, yet traders will scrutinize Chair Jerome Powell’s statement for insights on the bank’s approach to future cuts. Higher interest rates tend to raise the opportunity cost of holding gold, a non-yielding asset.
This, in turn, could add downward pressure on gold prices in the short term. However, some analysts argue that long-term inflationary concerns linked to Trump’s policy agenda may still support a bullish outlook for gold.
“Although rate cuts might slow, I believe gold’s appeal as a hedge against economic uncertainty remains strong. We could still see gold reach $3,000 next year,” commented Peter Fung, Head of Dealing at Wing Fung Precious Metals.
#Gold has won three consecutive intraday shorts. Don't chase it now. The Fed's interest rate decision is getting closer and closer. Wait until the Fed's interest rate decision before making any moves. However, the idea of continuing to short on rebounds remains unchanged. Gold… pic.twitter.com/UZ65FQlGAR
— Alana (@Alana_CFA) November 6, 2024
Technical Analysis: Gold Under Selling Pressure but Oversold Levels Signal Possible Bounce
Gold’s recent sell-off has seen prices break below critical technical levels. Trading at $2,655, the metal remains below its 50-day EMA of $2,724, indicating sustained bearish momentum.
Key resistance levels now stand at $2,684, $2,702, and $2,727, each acting as potential hurdles to any recovery attempt. On the downside, immediate support lies at $2,638, with further critical levels at $2,623 and $2,603, which, if breached, could prompt a more significant decline.
Additionally, the Relative Strength Index (RSI) is at 20.66, suggesting that gold is deeply oversold and may be due for a technical bounce. However, a sustained recovery remains uncertain as long as gold trades below the $2,684 mark.
Key Insights
Immediate Resistance: $2,684; a break above may signal a recovery.
Immediate Support: Strong support at $2,638; deeper declines if breached.
Oversold Levels: RSI at 20.66 signals potential for a short-term bounce.
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