Gold prices (XAU/USD) have remained in a consolidative phase during the early European session on Wednesday, holding close to the all-time peak reached last week. Traders appear cautious, awaiting the release of the Federal Open Market Committee (FOMC) meeting minutes, which could provide insights into the Federal Reserve’s future rate-cut trajectory. This, in turn, may influence the US Dollar (USD) dynamics and give gold further direction.
In the meantime, expectations of additional rate cuts by the Fed have kept USD strength in check. Geopolitical tensions, particularly concerns about US President Donald Trump’s tariff plans and the potential for a global trade war, continue to support gold’s safe-haven appeal. The lack of significant selling pressure suggests gold remains poised for upward momentum, with any minor pullbacks likely seen as buying opportunities.
Market Cautious Ahead of FOMC Meeting Minutes
Market optimism surrounding a delay in Trump’s tariffs and ongoing peace talks about the Russia-Ukraine conflict prompted some profit-taking in gold on Wednesday. However, the threat of escalating trade tensions and expectations for further monetary easing by the Fed continue to underpin gold prices.
Recent weak US Retail Sales data, coupled with mixed inflation signals, has strengthened the belief that the Fed may reduce interest rates as soon as the September or October meeting. The possibility of a 40 basis point rate cut by year-end, as reflected in Fed Funds Futures, has kept the USD from recovering much of its losses and supports gold’s upward trend.
San Francisco Fed President Mary Daly’s comments on holding interest rates steady until inflation targets are more clearly in sight further reinforce market expectations for dovish Fed policy, providing additional support to gold.
Gold’s Technical Setup Remains Bullish
Technically, gold’s range-bound price action is seen as a bullish consolidation following its recent surge to record highs. The daily Relative Strength Index (RSI) remains near overbought levels, suggesting that while consolidation is likely, the overall trend still favors bullish traders.
Key support levels include the $2,900 area, with further support near the $2,878-2,876 zone and the $2,860-2,855 range. A significant break below these levels could trigger additional selling pressure, pushing prices toward the $2,815 and $2,800 marks.
On the upside, the $2,940-2,942 region, marking the recent peak, remains a strong resistance level. A breakout above this threshold would signal a continuation of the bullish trend, with potential for further gains in the coming weeks.
Conclusion
Gold prices remain in a consolidation phase near record highs, with traders eagerly awaiting the release of the FOMC meeting minutes for clues on the Federal Reserve’s interest rate policy. The possibility of further rate cuts, alongside ongoing geopolitical tensions, continues to support gold’s appeal as a safe-haven asset. Technically, the outlook remains bullish, with any short-term pullbacks likely to be viewed as buying opportunities. However, the key focus for the market will be on how the Fed’s policy direction evolves, as this will play a pivotal role in shaping gold’s price action in the near term. A break above current resistance levels could signal further upside potential, while a slip below key support levels may prompt corrective selling.