Gold remains stable as markets await Fed decision

September 18, 2024

Key points:

• Spot gold edged 0.1% higher to $2,572.11 per ounce, rising near its recent record of $2,589.59.
• The market is pricing in a 64% probability of a 50 bps Fed rate cut, raising expectations for gold’s appeal.

Gold prices held their ground early Wednesday as the market remains on alert for the outcome of the Federal Reserve’s meeting later in the day.

See: Gold trading at 2570.70 as seen on the VT Markets app.

Gold recently hit a high of $2,589.7 before retracing to $2,570.61. The 30-minute chart shows that prices are still trading above key support levels near $2,560, which have held up despite the retracement from the highs. The MACD indicator suggests bearish momentum is waning, and the price is hovering near the 50-period moving average.

We believe that if gold holds above $2,560, it could attempt to retest the recent high. However, failure to maintain these levels may see prices consolidate or drift lower toward the $2,550 range before making another directional move.

Elevated geopolitical risks and concerns over global growth are expected to continue supporting the yellow metal’s upward bias.

Surprise rise in U.S. retail sales adds to market uncertainty

Further fuelling the uncertainty in markets, U.S. retail sales data for August revealed a surprising 0.1% rise, reflecting that the American economy may still be resilient.

This unexpected economic strength could play into the Fed’s decision-making, potentially influencing whether a more aggressive or conservative rate cut will be announced.

Geopolitical tensions bolster gold’s safe-haven appeal

Additionally, geopolitical risks remain at the forefront. The militant group Hezbollah has threatened retaliation against Israel after recent explosions in Lebanon that claimed nine lives. Such unrest can further support gold’s role as a safe-haven asset, especially in periods of geopolitical uncertainty.

Mixed performance in precious metals ahead of Fed decision

Other precious metals saw mixed movements. Spot silver dipped 0.1% to $30.69 per ounce, platinum rose slightly by 0.1% to $982.79, and palladium was flat at $1,115.69. Each of these metals is also likely to react to the Fed’s decision, with potential ripple effects across the commodities market.

We expect gold prices to maintain a cautious outlook ahead of the Fed’s decision. If the Fed opts for a 50 bps cut, gold could break past its recent record, testing new highs. A more conservative 25 bps cut, however, may temper gold’s momentum while keeping its appeal intact amidst geopolitical risks. In both scenarios, volatility in the broader market will be a key driver for gold’s performance over the coming days.

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