Gold prices took a significant dive, plummeting over 3% to $2650 per troy ounce, as the US dollar soared in the wake of Donald Trump’s decisive victory in the US presidential election. The strong dollar, fueled by investor sentiment and expectations of a more conservative approach from the Federal Reserve on interest rate cuts, exerted significant pressure on the precious metal.
As of Thursday, gold prices remain near three-week lows, reflecting the ongoing impact of the robust dollar. The market’s expectations have shifted, with investors anticipating a more cautious approach from the Federal Reserve regarding interest rate cuts. Trump’s victory, perceived as pro-inflation due to his protectionist policies, could prompt the Fed to maintain higher lending rates to counteract potential inflation spikes. This would dampen the appeal of non-yielding assets like gold, which typically thrives in times of economic uncertainty.
Today’s spotlight is firmly on the Fed’s interest rate decision, which is widely anticipated to include a 25-basis-point cut. This expectation has been priced into the market, influencing the current gold prices. However, it’s not just the rate cut itself that matters; Gold’s future trajectory will hinge heavily on the Fed’s accompanying commentary and subsequent rate decisions. While rates are projected to decrease, the pace and extent of these cuts will be crucial in determining gold’s appeal.
Technical Analysis: XAU/USD
Recent market dynamics have seen gold peak at $2790.00, followed by the formation of a consolidation range below this level. Breaking out of this range downwards paved the way for a substantial correction, with gold forming its initial corrective wave. The immediate downside target is $2617.40, with potential for further decline towards $2575.75 if the downward trend persists.
The MACD indicator echoes this bearish sentiment, with its signal line trending sharply downwards below zero, suggesting continued declines. The hourly chart illustrates a developing downward wave aiming for $2635.65. If this target is met, a corrective rally to $2683.11 could occur before further declines resume towards $2617.17, marking the primary target in this bearish phase.
The Stochastic oscillator hints at potential short-term upside, with its signal line nearing the 80 level, suggesting a brief corrective uptick before continuing its descent.
