Gold Price Outlook: Fed’s Rate Cut Slowdown Weakens Appeal for Non-Yielding Metal

Gold prices are on track for a weekly decline as the Federal Reserve signaled a slowdown in its monetary policy-easing cycle.

On Wednesday, the Fed’s decision to cut interest rates by 25 basis points pushed gold to its lowest level since November 18. The central bank’s cautious tone and projections have dampened the outlook for further rate cuts, weakening demand for the non-yielding asset.

The focus has now shifted to the U.S. Personal Consumption Expenditure (PCE) data, the Fed’s preferred inflation gauge, which will provide further insights into the U.S. economic outlook. The slightly hawkish composition of the Fed’s 2025 voting members also adds to market uncertainty, with expectations that dissent over further rate cuts could increase next year.

 

XAU/USD

U.S. Economic Growth Pressures Gold

Recent U.S. economic data has reinforced expectations of a measured approach from the Fed. Third-quarter GDP data released on Thursday revealed the economy grew faster than anticipated, while jobless claims dropped more than expected. These stronger-than-expected figures reduce the likelihood of aggressive rate cuts, which typically benefit gold.

Higher interest rates reduce the appeal of gold as they increase the opportunity cost of holding the non-yielding metal. As a result, gold’s consolidation near $2,599.53 reflects investor caution ahead of the PCE data release, which could influence Fed policy and broader market sentiment.

Technical Analysis: Key Levels to Watch

Gold is trading near $2,599.53, consolidating around the $2,604.06 pivot point. On the 2-hour chart, gold is attempting to form an ascending trendline, but bearish sentiment remains dominant as the metal stays below its 50 EMA at $2,626.94.

Key Price Levels:

  • Resistance: $2,627.59, with further targets at $2,651.30 and $2,674.56.

  • Support: $2,584.75, with deeper levels at $2,560.10 and $2,543.89.

The RSI at 38.13 indicates oversold conditions, suggesting a potential for recovery, but a decisive breakout above resistance at $2,627.59 is needed to confirm upward momentum. Conversely, a break below $2,584.75 could push prices toward lower support levels, signaling further weakness.

Key Takeaways:

  • Gold faces resistance at $2,627.59, with recovery dependent on breaking this level.

  • RSI shows oversold conditions, hinting at short-term bounce potential.

  • Fed’s cautious stance and robust U.S. economic data weigh on gold’s appeal.

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ABOUT THE AUTHOR See More
Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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