Fed's Moderate Interest Rate Cut Expected to Curb Gold Price Rise Amid Rising Geopolitical Risks
Gold prices are expected to remain high amid rising geopolitical tensions in the Middle East, but any significant surge is likely to be limited by the Federal Reserve's (Fed) cautious stance on monetary easing.
The Fed is expected to cut interest rates by 25 basis points in November where the Federal Reserve's (Fed) approach in lowering interest rates moderately is expected to limit the potential for a large increase in gold prices.
The Fed's strategy of maintaining stability while managing inflation has caused the market to no longer expect the implementation of large-scale interest rate cuts.
This moderate action shows that, while gold is seen as likely to benefit from support from a weaker dollar and lower Treasury yields, the potential for large gold price gains is seen to be limited.
Meanwhile, geopolitical risks continue to rise, particularly in the Middle East, where ongoing conflicts have shaken markets. Investors are turning to gold as a hedge asset, seeking safety from the uncertainty sparked by regional instability.
Recent indications from Israel that it may take aggressive action to attack Iran's energy infrastructure if necessary have raised concerns about disruptions to world crude oil supplies, increasing demand for gold as a safe-haven asset.
However, despite these factors supporting gold prices, gold's rise may be limited by the Fed's stable monetary policy. The Fed's commitment to a gradual cycle of interest rate easing is seen to reduce the likelihood of a sharp spike in gold prices.
Technical Analysis of Gold Price
From a technical perspective based on the 2H chart, gold's path forward will face several important price levels that can determine market sentiment.
Gold's upward momentum may continue if geopolitical tensions persist, but gold is seen to face major resistance at $2,682.95.
If the price crosses this level, further increases may occur, but if it fails to break through the level, a "correction" phase may occur.
A break below $2,665 would increase the risk of a massive selloff, with the critical pivot point for the week at $2,655.17.
Market players are expected to continue to monitor geopolitical developments and policy signals from the Fed. Gold remains the asset of choice amid uncertainty, but the interplay between demand for safe-haven assets and the Fed's cautious approach in cutting interest rates will be a key factor shaping gold's price trajectory in the coming months.
