- Gold attracts safe-haven flows following the post-FOMC sell-off in equity markets.
- The Fed’s hawkish stance pushes US bond yields to multi-month highs, providing upward pressure on XAU/USD.
- Traders are now focused on the upcoming US Q3 GDP data for market direction ahead of the US PCE data release on Friday.
Gold (XAU/USD) continues its intraday recovery from a one-month low, rising to a fresh daily high of around $2,622 during the early European session on Thursday. The global risk sentiment deteriorated following the Federal Reserve’s hawkish rate cut on Wednesday, with geopolitical tensions and trade war concerns further driving safe-haven flows into gold.
Meanwhile, the US Dollar (USD) is consolidating its gains from the previous day’s post-FOMC surge to a two-year high, offering little momentum for gold. However, the Fed’s indication of a slower pace of rate cuts continues to support US Treasury yields, which in turn bolsters the US Dollar. This may limit any further upside for gold, suggesting that bullish traders should exercise caution.
Gold Price Gains Amid Global Flight to Safety
- The Federal Reserve, as expected, lowered its benchmark policy rate for the third time since September and signaled a slowdown in the pace of rate cuts, triggering a sell-off in US equity markets.
- This sell-off spilled over into Asian stocks on Thursday, boosting demand for safe-haven assets and prompting short-covering in gold, helping it rebound from a one-month low.
- The Fed’s dot plot now indicates a fed funds rate of 3.9% in 2025, suggesting two additional 25 basis point cuts, compared to the previous forecast of four cuts in September.
- In his post-meeting remarks, Fed Chair Jerome Powell noted that while inflation has eased significantly over the past two years, it remains somewhat above the central bank’s 2% longer-term target.
- The yield on the 10-year US Treasury bond rose to its highest level since May, supporting the US Dollar and limiting further upside for non-yielding gold.
- Traders are now focused on Thursday’s US economic data, including the final Q3 GDP report and Weekly Initial Jobless Claims, for short-term direction.
- Attention will then shift to Friday’s release of the US Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, which is expected to impact both the USD and gold prices in the near term.
Gold Price Strengthens Above 23.6% Fibo Level; Potential for Further Upside
From a technical standpoint, gold’s overnight close below the 100-day Simple Moving Average (SMA) and the $2,600 level was seen as a fresh signal for bearish traders. Oscillators on the daily chart have started to gain negative momentum, suggesting that the path of least resistance for gold may remain to the downside. However, Thursday’s recovery attempt stalled near $2,618, the 23.6% Fibonacci retracement level of the recent decline from last week’s one-month high. This level now serves as a key pivot. If gold manages to hold above it, a wave of short-covering could push the price toward the $2,635 region, the 38.2% Fibo level, and possibly to the $2,655-$2,656 supply zone, near the 50% retracement level.
On the downside, the $2,584-$2,583 zone from the Asian session low is seen as immediate support. The next key support is at $2,560. A break below this could bring the November swing low into play around the $2,537-$2,535 region. Further selling could lead to a decline below the psychological $2,500 mark, with the 200-day SMA at $2,470 providing critical support.
