After reviewing the futures charts this week, it looks like bulls struggling to hold recent highs above $3700 may trigger a selling spree. This comes as the countdown begins for an anticipated , widely expected to lower the benchmark rate by 0.25% to 4.00%-4.25%. The Fed will also release updated guidance and the members’ rate projections, known as the “dot plot.”
Undoubtedly, this 25-basis point rate cut has already factored in the current price of the gold, but still, the movements of the gold futures, reflecting the persisting fear among the bulls, edged lower after testing a record high at $3739 this Tuesday, currently trading at $3704 on Wednesday, while the interest rate decision is just 10 hours away.
On the other hand, the dollar has been selling off ahead of this event, but there are a few risks, as we could see short-dated US rates back up a little and the dollar gets a brief bid if the Fed Dot Plots continues to show just 50 basis point cuts this year, compared to the 70 bp now priced.
Now, the hovered bear 11-week lows, adding some support to bullion while the gold prices have surged more than 40% so far this year amid Trump’s aggressive trade policy, conflicts in the Middle East and Ukraine, and central bank buying.
Undoubtedly, such a scenario indicates the advent of currency revaluation to start soon amid policy swift to combat global inflation https://www.investing.com/analysis/global-inflation-concerns-trade-tensions-could-set-stage-for-currency-adjustments-200666887 as the changing patterns of economic policies to deal with surging global inflation, along with stagnant growth could be the main reason behind the Japanese central bank’s indication for a rate hike in its meeting this Friday.
Undoubtedly, growth in advanced economies is projected to be 1.4% in 2025 while growth in the United State is expected to slow to 1.8%, a pace that is 0.9 percentage point lower to the projection in January 2025 WEO Update, on account of greater policy uncertainty, trade tension, and other demand momentum, whereas growth in euro area at 0.8 percent is expected to slow by 0.2 percentage point.
Technical Level to Watch
In a daily chart, gold futures, after testing a high at $3732.80, have tested a low at $3698.30, currently trading at $3704.35, indicates an extensive bearish pressure after finding a breakdown below the immediate support at $3715 on Wednesday which looks evident enough to push the futures to test the next significant support at the 9 DMA at $3690 where a breakdown below this could push the futures to the next support at the 20 DMA at $3582.
Inversely, any upward move by the gold futures post-Fed announcement above the significant resistance at $3739 will provide a good opportunity for big bears to load fresh shorts with a stop loss at $3773 for a target at $3470.
In a 1-hr. chart, gold futures are trying to defend the immediate support at the 100 DMA at $3797, where a breakdown could push the futures to test the next support at the 200 DMA at $3680, and if the gold futures are not able to hold this significant support, a sliding spree will likely continue.
Disclaimer: Readers are advised to take any position in gold futures at their own risk, as this analysis is based only on observations.