Gold Price Forecast: XAU/USD Slips 0.4% to $3,671 as Fed Rate Cut Looms
Gold fell 0.4% to $3,671.30 in December futures on Monday as traders took profits after last week’s big rally. A small bounce...
Quick overview
- Gold prices fell 0.4% to $3,671.30 as traders took profits following a recent rally.
- The US dollar's slight bounce added pressure on gold, making it more expensive for overseas buyers.
- Expectations of a 25bps rate cut by the Fed this Wednesday are limiting gold's losses.
- Traders are advised to buy near $3,641 with stops below $3,626, targeting levels above $3,673.
Gold fell 0.4% to $3,671.30 in December futures on Monday as traders took profits after last week’s big rally. A small bounce in the US dollar index, up 0.1%, added pressure by making bullion more expensive for overseas buyers.
Tim Waterer, Chief Market Analyst at KCM Trade, said gold was “overbought on a technical basis” to start the week and short term profit taking was due. The Relative Strength Index (RSI) was near 75, which supported the view that prices had gone up too fast too soon.
But gold’s losses were limited by expectations of a 25bps rate cut this Wednesday, which is fully priced in after a series of soft labour market reports.
Fed Policy in Focus
The Fed is in the spotlight. Traders expect dovish, despite last week’s slightly higher than expected inflation print. A rate cut would lower yields on other safe-haven assets, making gold more attractive.
The backdrop is complicated by the legal fight over Fed Governor Lisa Cook’s position and the nomination of Stephen Miran to the Board of Governors. Political noise may add uncertainty but markets are focused on easing as the main driver.
“A consolidation phase is possible,” said Waterer, “but dips to $3,500 should be bought as long as the Fed is supportive.”
Gold (XAU/USD) Levels to Watch
Gold is trading in a rising channel, with buyers defending higher lows at $3,626. The 50 period moving average at $3,641 has been a pivot and a recent bullish engulfing candle suggests dip buying is back in play.
Key points:
- Resistance at $3,656: Multiple failures here and it’s a triple top risk.
- Breakout: Above $3,656 and $3,673 and $3,690, confirmed by a three white soldiers pattern.
- Downside risk: Below $3,626 and $3,613 and $3,598, invalidates the bullish setup.
For traders, the trade is clear: aggressive buyers can buy near $3,641 with stops below $3,626, targeting $3,673 and above. Conservative players may wait for a confirmed break above $3,656 before getting in.
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