gold prices are attempting a modest recovery after reaching a three-week low of $2,644 earlier today. This decline follows a sharp sell-off triggered by the recent political developments in the United States, particularly the victory of Donald Trump in the presidential race. gold remains under pressure as investors await further indications from the Federal Reserve regarding its monetary policy.
The US Dollar has entered a phase of bullish consolidation, recently hitting its highest levels in four months against various major currencies. This rally is largely attributed to renewed interest in Trump-related trades. The anticipated economic policies, including potential tax cuts and tariffs, are expected to elevate inflation pressures, impacting Wall Street, Treasury yields, and the Dollar’s value.
As the market adjusts to Trump’s presidency, gold has retreated approximately $100 from its previous resistance level of $2,750. Attention now shifts to the Federal Reserve’s upcoming policy decisions. There is a consensus that the Fed is likely to announce a 25 basis point rate cut; however, investors are keenly analyzing any hints about the future direction of interest rates.
The return of Trump may lead the Fed to adopt a more cautious approach regarding monetary easing given his potential inflationary policies. The Fed Chair’s forthcoming remarks are expected to highlight the central bank’s commitment to independence and responsiveness to evolving economic conditions. As the labor market shows signs of slowing, the Fed will continue to rely heavily on economic data in its decision-making process.
From a technical perspective, gold has breached several key Fibonacci retracement support levels. The 14-day Relative Strength Index indicates bearish momentum, currently positioned near 43, suggesting the potential for additional declines ahead. However, a short-term rebound might occur as buyers aim to maintain crucial support at $2,641. This level coincides with both the 50-day Simple Moving Average and the 78.6% Fibonacci level from the recent rally. If buying pressure can solidify above $2,673, gold may test the significant resistance at $2,700. Conversely, if the Fed signals a more restrained monetary easing strategy, gold could break through key support levels, potentially leading to a further decline towards lower levels, including the psychological level of $2,550.
