• Gold price bounces early Thursday after a volatile post-Fed trading on Wednesday.  
• The US Dollar extends recovery with Treasury bond yields, as a jumbo Fed rate cut was priced in.
• The daily bullish RSI continues to keep buyers alive, as Gold price looks to retest $2,600.

Gold price is defending $2,550 early Thursday, catching a breath after intense volatility witnessed in the aftermath of the all-important US Federal Reserve (Fed) monetary policy announcements and Fed Chairman Jerome Powell’s press conference.

Gold price fails to capitalize on jumbo Fed rate cut

Traders turn their focus to the upcoming US Jobless Claims and Existing Home Sales data to gauge the health of the overall economy, which could shed fresh light on the future path of rates by the Fed, having a significant impact on the value of the US Dollar and Gold price.

The Fed announced a 50 basis points (bps) rate cut on Wednesday, bringing the fed funds rate to the range of 4.75%-5.0%. The Summary of Economic Projections, the so-called Dot Plot chart, suggested a total of 100 bps of rate cuts for this year and the next.

Fed Chair Jerome Powell, during his press conference, also maintained a dovish tone, explaining that “this recalibration of our policy stance will help maintain the strength of the economy and the labor market, and will continue to enable further progress on inflation as we begin the process of moving toward a more neutral stance. We are not on any preset course. We will continue to make our decisions meeting by meeting.”

In an immediate reaction to the Fed policy announcements, the US Dollar (USD) tumbled to the lowest level in over a year against its major rivals amid a sharp sell-off in the US Treasury bond yields, lifting the non-interest-bearing Gold price to a fresh record high of $2,600. However, Gold price faced rejection at that level and corrected sharply to settle in the red near $2,560.

The pullback in the Gold price was fuelled by an impressive turnaround staged by the US Dollar, as an outsized rate reduction was well priced in by the markets. Further, hopes that a large Fed rate cut could lead to a potential ‘soft-landing’ for the US economy also aided the Greenback’s recovery across the board.

The USD recovery stretched into the Asian session on Thursday, keeping Gold price struggling, as traders look to a fresh batch of US economic data for fresh trading impetus. Gold price, however, continues to find support at lower levels, courtesy of the renewed Middle East geopolitical tensions.

According to the latest reports, at least 20 people were killed and over 450 injured in Lebanon after hand-held radios or walkie-talkies used by the militant group Hezbollah exploded in multiple parts of the country. These explosions occurred a day after a suspected Israeli attack targeting pagers used by the group for communication between its members.

A re-escalation of the tensions between Israel and Hezbollah is likely to bode well for the traditional safe-haven Gold price, also as hopes of further rate cuts. Markets are now pricing in a 25 bps rate cut at the Fed’s November and December meeting.

Gold price technical analysis: Daily chart

As observed on the daily chart, Gold price remains bullish, as the 14-day Relative Strength Index (RSI) turns north while well above the 50 level, currently near 63.00.

The renewed upside in Gold price could challenge the previous record high at $2,590 again before taking on the $2,600 threshold.

Acceptance above that level will call for a test of the $2,650 psychological barrier.

On the flip side, if the corrective decline resumes, Gold price could threaten the previous day’s low of $2,547, below which the August 20 high of $2,532 will be tested.

Further down, the 21-day Simple Moving Average (SMA) at $2,524 could be a tough nut to crack for Gold sellers.

Wall Street financial services company UBS has cut its oil price forecasts for the period 2024-2026, citing weaker global demand and a more stable supply outlook. The analysts have lowered the forecast for average Brent crude oil in 2024 by $4 to $80 per barrel, with the forecast for Q4 2024 lowered to $75 per barrel from $83.

UBS now sees Brent averaging $75 per barrel in both 2025 and 2026, a $5 per barrel reduction. The analysts have suggested that OPEC+ will be forced to postpone the unwinding of its voluntary production cuts, with any meaningful increases now seen coming in 2027 or 2028, compared to earlier expectations of a return by mid-2025. 

The latest oil price rally continued on Monday’s session despite crude production in the Gulf of Mexico resuming following disruptions caused by Hurricane Francine. Brent crude for November delivery was up 1.3% at 11.50 am ET to trade at $72.56/barrel while WTI crude for October delivery was up 1.0% to change hands at $69.66/barrel.

Last week, commodity experts at Standard Chartered reported that oil markets are overlooking the imminent removal of even more barrels from the markets in the coming months. Back in July, Russia, Iraq and Kazakhstan submitted their compensation plans to the OPEC Secretariat for overproduced crude volumes for the first six months of 2024. According to OPEC, the entire over-produced volumes will be fully compensated for over the next 15 months through September 2025, with Russia ‘paying back’ a cumulative 480 kb/d, Iraq 1,184 kb/d and Kazakhstan 620 kb/d. According to StanChart, the compensatory output cuts by the three OPEC members work out to a combined 370 kb/d reduction in October, and then an amount varying between 162 kb/d and 206 kb/d for November 2024 through to September 2025. StanChart has worked out that adding the compensation schedule to the recently announced reduction in targets due to delaying the implementation of tapering will result in OPEC production clocking in at 530 kb/d lower in Q4-2024; 540 kb/d lower in Q1 and Q2-2025 and 560 kb/d lower in Q3-2025, if all commitments are kept.

By Alex Kimani for Oilprice.com

More Top Reads From Oilprice.com

XAU/USD Current price: $2,572.12

• The Federal Reserve is about to announce its decision on monetary policy.
• A 25 basis points rate cut has been already priced in, but officials could still surprise markets.
• XAU/USD turned lower in the near term, the Fed will set the tone.

Gold hovers around $2,570 a troy ounce on Wednesday, unchanged on a daily basis as the Federal Reserve’s (Fed) monetary policy announcement looms. The United States (US) central bank is expected to trim interest rates for the first time in four years after pushing toward record highs amid soaring inflation in the pandemic aftermath. Policymakers are also weighing the effects of monetary restrictions on economic progress, but the market won’t hear that from them.

The Fed will also release the Summary of Economic Projections (SEP) with fresh forecasts for growth, inflation and unemployment and officials´ views on the future path for monetary policy. The latter could have a large impact on the US Dollar, as, ahead of the announcement, financial markets have already priced in a 25 basis points (bps) rate cut.

Generally speaking, the more dovish the event, the more will the US Dollar lose against its major rivals, while an unexpected hawkish outcome will likely have a larger impact amid the surprise factor, benefiting the American currency.

XAU/USD short-term technical outlook  

From a technical point of view, the daily chart for XAU/USD shows the risk skews to the upside. The pair holds near an all-time high of $2589.50 posted this week, while all moving averages aim higher, far below the current level. The closest one is the 20 Simple Moving Average (SMA), providing support in the $2,520 price zone. At the same time, technical indicators hold well above their midlines with uneven and limited directional strength.

In the near term, however, the risk leans to the downside. A directionless 20 SMA provides intraday resistance, rejecting advances. The 100 and 200 SMA have partially lost their upward strength, far below the current level. Finally, technical indicators aim lower, with the Momentum indicator accelerating lower below its 100 line.

Support levels: 2,561.65 2,550.00 2,542.40

Resistance levels:  2,574.80 2,590.00 2,605.00  

• Silver attracts some sellers and drops to a fresh weekly low on Wednesday.
• Any further slide could be seen as a buying opportunity and remain limited.
• The $29.40 confluence resistance breakpoint might now act as a strong base. 

Silver (XAG/USD) drifts lower during the Asian session on Wednesday and moves away from a one-month peak, around the $31.10 region touched earlier this week. The white metal currently trades around mid-$30.00s, or the weekly low and down nearly 0.70% for the day, though the technical setup supports prospects for the emergence of some dip-buying. 

The recent breakout through a short-term descending trend-line resistance, around the $29.40 area, which coincided with the 100-day Simple Moving Average (SMA) validates the near-term positive outlook. Moreover, oscillators on the daily chart are holding in positive territory and are still far from being in the overbought zone, suggesting that the path of least resistance for the XAG/USD is to the upside. 

From current levels, any subsequent decline is likely to attract fresh buyers near the $30.00 psychological mark. This should help limit the downside near the $29.40 confluence resistance breakpoint, now turned support. The latter should act as a pivotal point, which if broken could drag the XAG/USD below the $29.00 round figure, towards the $28.45-$28.40 intermediate support en route to the $28.00 mark.

On the flip side, the $30.80 region now seems to act as an immediate hurdle ahead of the $31.00 mark, above which the white metal could prolong its appreciating move. The XAG/USD might then climb to the $31.45 region and retest the July swing high, around the $31.75 zone, before aiming to reclaim the $32.00 round-figure mark and challenge a one-decade high, around mid-$32.00s touched in May.

Silver daily chart

Interest rates have been kept high to squeeze the economy and slow down price rises – reducing inflation.

In a long-awaited move, the Bank of England cut the base rate from 5.25% to 5.0% last month- and is meeting again tomorrow.

This morning’s inflation data, however, has furthered dampened hopes of another cut tomorrow, analysts say. 

The markets now put the chance of a 0.25 percentage point cut at 26% – it was 37% before the release of inflation data an hour ago.

Capital Economics analysts say the next cut is expected to take place in November. 

“The good news on inflation in recent months did not last for long. As we had expected, food and fuel price inflation exerted some downward pressure on CPI inflation,” Ruth Gregory, deputy chief UK economist, says.

“But this was offset by the upward effects from rising furniture/household equipment inflation, recreation/culture inflation and a surprisingly large rise in airfares inflation from -10.1% in July to +11.9% in August. 

“As a result, core inflation crept back up from 3.3% to 3.6%. And after falling in July to its lowest rate in two years of 5.2%, services inflation rebounded to 5.6% in August.”

Two other measures were below predictions: CPI was below the 2.4% first predicted in August and services inflation was 5.6%, below the Bank’s prediction of 5.8% (some of which was due to the rise in airfares, which are volatile in August anyway). 

“But there’s no denying that services inflation is still too high for the Bank of England’s liking. And CPI inflation will almost certainly rise in the coming months, perhaps to 2.9% in November due to higher utility prices before it falls back towards 2.0% in mid-2025. So the Bank may start to worry about the trajectory of CPI inflation and services inflation,” Ms Gregory says.

“Overall, a pause on interest rate cuts was already expected tomorrow and today’s release cements that view.”

Oil prices increased by approximately 2% on Monday, driven by ongoing disruptions to U.S. Gulf oil infrastructure, which offset persistent concerns about demand following new data from China. Investors are also anticipating a potential reduction in U.S. interest rates later this week.

By 1315 GMT, Brent crude futures for November rose by $1.40, or 1.96%, reaching $73.01 a barrel. Meanwhile, U.S. crude futures for October climbed by $1.60, or 2.33%, to $70.25 per barrel.

The market is expected to remain cautious until the Federal Reserve announces its interest rate decision on Wednesday, Phillip Nova analyst Priyanka Sachdeva, was quoted as saying by Reuters.

Sachdeva further noted that prices continue to be supported by supply concerns, as some production capacity remains offline in the Gulf of Mexico.

What’s weighing on crude oil prices?

The market remains cautious ahead of the Federal Reserve’s interest rate decision scheduled for Wednesday.

Traders are increasingly leaning towards a 50 basis point rate cut by the Fed, rather than a 25 basis point reduction, as indicated by the CME FedWatch tool that monitors Fed fund futures.

Typically, lower interest rates decrease borrowing costs, which can stimulate economic activity and increase demand for oil.

A 50 basis point rate cut by the Federal Reserve could indicate underlying weakness in the U.S. economy, which may raise concerns about future oil demand, OANDA market analyst Kelvin Wong, was quoted as saying by Reuters.

China’s industrial output growth, the highest oil importer globally, slowed to a five-month low in August, with further declines in retail sales and new home prices.

Additionally, the country’s oil refinery output decreased for the fifth consecutive month due to weak fuel demand and reduced export margins.

Last week, both Brent and WTI crude prices rose by approximately 1%, yet they remain significantly below their average prices for August, which were $78.88 and $75.43 per barrel, respectively. This decline was influenced by concerns over demand that emerged at the beginning of the month.

(With inputs from Reuters)

• Gold price bounces after the previous retreat from record highs, as Fed verdict looms.  
• The US Dollar returns to the red amid pre-Fed caution and sluggish Treasury bond yields.  
• Gold price could retest lifetime highs at $2,590 amid the bullish daily RSI and while above $2,560.

Gold price is finding some fresh demand near $2,570 early Wednesday, as buyers look to fight back control following the previous day’s correction from record highs of $2,590. Traders, however, could refrain from placing fresh directional bets on Gold price in the lead-up to all-important US Federal Reserve (Fed) monetary policy announcements.

Gold price eyes Fed interest rate decision and Powell speech

On the Fed day, markets continue to price in a 65% probability of 50 basis points (bps) interest rate cut, the CME Group’s FedWatch Tool showed, reviving the selling interest around the US Dollar (USD), as the US Treasury bond yields also turn defensive amidst the market caution.

Thus. Gold price attempts to retake the all-time-high just shy of the $2,600 mark, with eyes on the Fed verdict, Chairman Jerome Powell’s press conference and the Dot Plot chart, all of which will help gauge the US central bank’s future policy action.

If the Fed delivers a 25 bps rate cut later this Wednesday, it could fuel a knee-jerk US Dollar upswing. However, the immediate reaction to the Fed announcements could be overshadowed by the implications of the Fed’s projections and Powell’s words. Gold price, therefore, remains subject to intense volatility during the Fed event.

An outrightly dovish outcome and rate projections by the world’s most powerful central bank could prompt Gold price to refresh record highs at the expense of the US Dollar. “A dovish Fed on a substantial easing path should generally lead to a weaker dollar,” said Nathan Swami, head of currency trading at Citi in Singapore.

In contrast, should the Fed acknowledge potential upside risks to inflation and maintain a cautious tone, it could bring the hawks back in the game, weighing negatively on the non-interest-bearing Gold price.

Gold price corrected briefly from record highs on Tuesday, courtesy of a profit-taking spree in the US Dollar ahead of the Fed event while strong US Retail Sales data also contributed to the resurgent USD demand. US Retail Sales rebounded by 0.1% MoM in August, data showed on Tuesday, against expectations for a 0.2% contraction. Data somewhat eased fears over a potential US ‘hard-landing’.

Gold price technical analysis: Daily chart

Gold buyers regain control, as the 14-day Relative Strength Index (RSI) remains comfortably above the 50 level, having eased off from near the overbought territory.

The optimism prevails so long as they defend the one-and-a-half-month-old symmetrical triangle target now support at $2,560.

That said, the immediate resistance is seen at the record high of $2,590, above which the $2,600 level will be tested.

Acceptance above that level will call for a test of the $2,650 psychological barrier.

If the Fed disappoints the doves, Gold price could witness a fresh sell-off, which could challenge the August 20 high of $2,532.

Additional declines will threaten the 21-day Simple Moving Average (SMA) at $2,522, below which the $2,500 mark will be on sellers’ radars.

• Silver is range-bound, amid bullish momentum, but flattening RSI signals indecision.
• A break above $31.09 could see Silver testing $31.75 and the YTD high at $32.51.
• On the downside, $30.52 is first support, followed by $29.86, with additional levels at the 100-DMA ($29.36) and 50-DMA ($28.98).

Silver price consolidates for the second straight day, prints back-to-back doji’s a sign that neither buyers nor sellers control the grey’s metal price action. At the time of writing, XAG/USD trades at $30.69, virtually unchanged, as the Wednesday Asian session commences.

XAG/USD Price Forecast: Technical outlook

Silver has been subdued during the last few days as traders brace for the Fed’s decision.

Momentum remains bullish, as portrayed by the Relative Strength Index (RSI), but its slope turned flat, hitting indecision amongst investors.

If XAG/USD clears the current week’s high of $31.09, this could underpin Siver’s to challenge the July 11 high at $31.75 ahead of the year-to-date (YTD) high of $32.51. On the other hand, if Silver drops below the September 17 daily low of $30.52, it would expose the September 13 low of $29.86, followed by the 100-day moving average (DMA) at $29.36, followed by the 50-DMA at $28.98.

XAG/USD Price Action – Daily Chart

Support is at or Above 200-Day MA

If a deeper pullback comes before new trend highs, natural gas should find support at or above its 200-Day MA, which is now at 2.24. A bullish breakout of the 200-Day line triggered last Wednesday, and it was confirmed the following day by a daily close above the line. Previously, natural gas had traded below the 200-Day MA since July 2. Since the price of natural gas moved away from the line following the breakout, it is the market’s way of confirming subsequent strength.

Therefore, the first real pullback to test support around the 200-Day line should be successful. If it is not, and natural gas falls below the 200-Day line, it will likely find support around the 20-Day and 50-Day MAs, from 2.18 to 2.16, respectively. However, that would be a deeper pullback that negates some of the strength indicated by the bullish breakout above the 200-Day line.

Higher Targets Remain

There are several higher targets yet to be tested. The first target zone is from 2.52 to 2.54. It is derived by the 50% retracement at 2.52, and an initial target for a rising ABCD pattern at 2.54. That price range is followed by a range from 2.65 to 2.72. The top of the range is significant is it marks an initial target derived from measuring the recent double bottom. A bull breakout of the double bottom triggered last Wednesday on a rally above 2.30. The 61.8% Fibonacci retracement is also contained within the price zone at 2.67.

Monthly Confirms Strength

Dynamics seen in the monthly chart confirm a bullish outlook. A bull breakout on the monthly time frame triggered at the same time the double bottom triggered as the prior swing high of 2.30 was also a monthly high. Since it covers a larger time frame it is given greater significance than the shorter weekly and daily charts. It just triggered last week and continues to point to higher prices for natural gas.

For a look at all of today’s economic events, check out our economic calendar.

XAU/USD Current price: $2,562.90

• Better than-anticipated United States data maintained investors cautiously optimistic.
• The Federal Reserve will announce its decision on monetary policy on Wednesday.
• XAU/USD is poised to extend its decline in the near term, bulls may surge on dips.

Gold price is marginally lower on Tuesday, with XAU/USD trading in the $2,560 region in the American session. The US Dollar gathered modest strength ahead of Wall Street’s opening amid better-than-anticipated United States (US) data. Local indexes hold on to modest gains, reflecting the optimistic mood that undermines demand for the safe-haven metal.

Still, financial boards’ activity is limited ahead of major central banks’ announcements. The Federal Reserve (Fed) will kick-start the wave of announcements on Wednesday, followed by the Bank of England (BoE) on Thursday and the Bank of Japan (BoJ) on Friday. The Fed is widely anticipated to trim interest rates for the first time in years, a movement that has been priced in long ago. The BoE, on the other hand, will likely remain on hold while speculative interest sees the BoJ hiking rates.

In anticipation of the Fed, speculative interest has priced in a 25 basis points (bps) rate cut, although there are some hopes the central bank will go for a wider trim of 50 bps. The level of aggressiveness from US officials will determine what will happen with Greenback on Wednesday. The more dovish the decision, meaning a 50 bps trim and anticipation of more cuts coming, the more will suffer the USD. The US Dollar, on the other hand, can recover sharply should the central bank deliver a more hawkish stance.

XAU/USD short-term technical outlook  

The daily chart for the XAU/USD pair shows the slide seems corrective. The pair keeps developing above all its moving averages, with the 20 Simple Moving Average (SMA) partially losing its bullish strength but well above the longer ones, at around $2,520. Technical indicators, in the meantime,  remain well above their midlines, although lacking clear directional strength. The Relative Strength Index (RSI) indicator eases from near overbought readings but not enough to anticipate a steeper decline.

In the near term, however, the risk skews to the downside. In the 4-hour chart, XAU/USD has broken below a bullish 20 SMA, while the 100 and 200 SMAs aim marginally higher, far below the current level. Finally, technical indicators aim south almost vertically, currently challenging their midlines and hinting at another leg south, particularly if Gold pierces the intraday low at $2,561.65.

Support levels: 2,561.65 2,550.00 2,542.40

Resistance levels: 2,574.80 2,590.00 2,605.00