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Gold Bulls Eye Historical High Amid Rate Cut Speculation

Gold Bulls Eye Historical High Amid Rate Cut Speculation

Market Overview

The gold market remains in an upward trend on Wednesday, driven by growing expectations for further rate cuts by the Federal Reserve. The likelihood of a 25-basis point cut in the upcoming Fed meeting has climbed to 91%, which has provided a boost to gold prices, particularly in Asian markets. Meanwhile, geopolitical tensions in the Middle East have increased the demand for safe-haven assets like gold. However, a stronger U.S. dollar, supported by signs of resilience in the U.S. economy, has slightly capped the upside potential for gold as higher dollar strength often makes gold less attractive for holders of other currencies.

Overall, the market sentiment for gold is largely positive, as investors weigh both the probability of lower U.S. interest rates and geopolitical uncertainty, which have historically been supportive of higher gold prices. A weaker dollar environment could further enhance gold’s appeal as a hedge against currency devaluation.

Technical Analysis

In the four-hour chart, gold has broken above the key price level of 2666.80 during the Asian trading session, thereby resuming its upward momentum. Buyers are currently challenging the next resistance level at 2674.62. A sustained move above this level would pave the way for further gains, with a primary target at 2684.57, which represents a historic high for gold. A successful breakout above this point would likely bring additional upside targets at 2695.55 and 2713.32 into play.

Momentum indicators provide strong confirmation for this bullish scenario. The 34-period moving average has crossed above the 100-period moving average, signaling sustained buying momentum. Furthermore, both the RSI and MACD are positioned bullishly, indicating that buyers are in control of the market at the moment. The RSI is moving upwards without reaching overbought territory, suggesting there is still room for further price growth before any major pullback is likely.

Price action has also moved consistently above the Ichimoku Cloud in the daily chart, reinforcing the overall bullish trend. The current move towards historical highs aligns with positive market fundamentals, including both inflation expectations and the Fed’s dovish outlook. This convergence of technical and fundamental factors increases the likelihood of continued upward movement.

Alternative Scenario

On the downside, if the price fails to hold above the recent breakout point at 2666.80 and subsequently breaks the support levels at 2655.82 and 2638.05, the current bullish outlook will be invalidated. In such a scenario, a deeper correction could be expected, especially if further economic data supports a stronger dollar, which would weigh on the gold price.

Key Levels Overview

Resistance Levels:

  • Resistance 3: 2713.32
  • Resistance 2: 2695.55
  • Resistance 1: 2684.57

Current Price: 2675.25

Support Levels:

  • Support 1: 2666.80
  • Support 2: 2655.82
  • Support 3: 2638.05

Key Events to Watch

The spotlight remains on upcoming economic data releases and central bank events. U.S. Import and Export Price Indices and the Federal Budget Balance are due later today. However, the focus will also be on Thursday’s ECB meeting and U.S. Retail Sales figures, which could have significant implications for gold volatility.

If the ECB signals a dovish tone and the retail sales figures fall below expectations, gold could benefit as investors reassess the global economic outlook. Conversely, stronger-than-expected retail sales could boost the dollar, which would add downside pressure to gold.

Conclusion

Gold is testing critical levels as buyers attempt to push the price towards a historical high of 2684.57. Strong bullish momentum, supported by technical indicators like RSI and MACD, indicates the likelihood of further gains. With the Federal Reserve expected to ease rates further and geopolitical risks supporting safe-haven demand, the bias remains to the upside.

However, traders should keep an eye on key economic data releases and central bank meetings scheduled this week. A breakout above 2684.57 could propel the price towards 2713.32, while a failure to hold above the key support levels would suggest a potential bearish correction. The direction of the dollar will be a critical determinant of gold’s next move, making this a week to watch for gold bulls and bears alike.

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