After Powell's hawkish remarks, gold is swimming in risk
Updated
The short-term volatility in the gold market on Tuesday (October 1) attracted a lot of attention following the latest speech by Federal Reserve Chairman Jerome Powell. The dollar rallied on Powell's hawkish comments, which dampened market expectations for aggressive rate cuts, while gold sought to balance safe-haven demand with dollar strength. Professional traders need to focus on the trend of the US dollar, US macroeconomic data, and the impact of geopolitical risks in the Middle East on gold prices.
Background and strong dollar
In Powell's latest speech, he made it clear that the Fed is in no hurry to cut interest rates further, and this hawkish tone has caused some turbulence in the market. The Fed had been widely expected to cut interest rates aggressively, especially after the recent release of more benign inflation data. But as Powell indicated that the Fed may adopt a more conservative pace of rate cuts, investors' optimism has cooled, and the dollar has strengthened on global currency markets.
The dollar's recovery has undoubtedly had a direct impact on gold prices. On Oct. 1, the U.S. dollar index rose 0.1% to record an intraday high of 100.87, further diminishing gold's appeal. Although gold prices rose slightly during the European session, they still failed to break through earlier highs. The overall market sentiment is still adjusting around the Fed's policy path.
Although the short-term strength of the US dollar has put some pressure on gold, geopolitical risks and uncertainty in the US economic data still provide safe haven support for gold. In the global market in particular, gold is still seen as the instrument of choice for dealing with risk.
The linkage between Federal Reserve policy and gold
Although Powell's speech cooled market expectations for aggressive rate cuts, the market still believes that the Fed will cut rates further during the year, possibly by 25 basis points. Traders use CME Group's FedWatch tool to assess the probability of a policy change. While expectations for a 50 basis point cut fell to 35.4 per cent, the market still widely expects the Fed to act again in the fourth quarter of this year.
For gold traders, the price of gold is closely linked to Federal Reserve policy, especially in the context of interest rate decisions. Although Powell's hawkish tone has dampened the market's optimistic expectations for interest rate cuts in the short term, if future economic data does not perform as expected, the Fed may readjust its policy, which will bring upward momentum to gold prices.
If the ISM non-manufacturing PMI and monthly non-farm payrolls report beat expectations again this month, the dollar is expected to strengthen further, weighing on gold in the short term. But he also pointed out that with rising global economic uncertainty, especially the continued low inflation in the United States, the Federal Reserve's policy may gradually shift to easing in the coming months, which will provide long-term support for gold.
Technical analysis: Key levels and market sentiment
From a technical point of view, gold prices remained near the $2,624 to $2,625 range on October 1, which is seen as an important support level. If gold breaks below this support, it could trigger a sharper decline, with targets pointing to $2,600 or even down to the $2,535 to $2,530 range.
On the other hand, resistance above the price of gold is concentrated in the $2,656 to $2,657 area. A break above this resistance would see gold climb further to $2,672 and even challenge last week's record high of $2,685. If it breaks above $2,700, gold could start a new rally.
Institutional analysts generally believe that the short-term trend of gold prices still depends on the performance of global macroeconomic data, especially the release of economic data in the United States. With the release of ISM manufacturing PMI and non-farm payrolls this week, sentiment could change again.
Market outlook: Where will gold go from here?
Overall, although the short-term rebound of the US dollar has put some pressure on gold, the market's expectations of the Fed's policy shift to easing and global geopolitical tensions still provide strong support for gold. In the long run, gold prices are expected to gain more room to rise against the backdrop of further interest rate cuts and rising safe-haven demand.
For traders, the core of the current market remains the focus on the Fed's policy moves and global risk events. In the short term, gold prices are likely to trade in the $2,600 to $2,700 range, and as macro data gradually comes out, the market will make a clearer judgment on the direction of the next few months.
It is important to note that while gold is currently showing strong support, market volatility has increased and the direction of gold prices in the coming months will face greater uncertainty. Therefore, investors need to be cautious when placing gold long or short positions, focusing on the combined impact of the Fed's policy signals and global risk factors.
In early October, the gold market was driven by both Powell's speech and geopolitical risks. While the dollar has strengthened, safe-haven demand for gold remains. While gold prices may face pullback pressure in the short term, the market's interest rate outlook and global risk events will continue to provide support for gold in the medium to long term. Traders will need to pay close attention to the performance of US economic data to grasp further changes in the gold market.
Background and strong dollar
In Powell's latest speech, he made it clear that the Fed is in no hurry to cut interest rates further, and this hawkish tone has caused some turbulence in the market. The Fed had been widely expected to cut interest rates aggressively, especially after the recent release of more benign inflation data. But as Powell indicated that the Fed may adopt a more conservative pace of rate cuts, investors' optimism has cooled, and the dollar has strengthened on global currency markets.
The dollar's recovery has undoubtedly had a direct impact on gold prices. On Oct. 1, the U.S. dollar index rose 0.1% to record an intraday high of 100.87, further diminishing gold's appeal. Although gold prices rose slightly during the European session, they still failed to break through earlier highs. The overall market sentiment is still adjusting around the Fed's policy path.
Although the short-term strength of the US dollar has put some pressure on gold, geopolitical risks and uncertainty in the US economic data still provide safe haven support for gold. In the global market in particular, gold is still seen as the instrument of choice for dealing with risk.
The linkage between Federal Reserve policy and gold
Although Powell's speech cooled market expectations for aggressive rate cuts, the market still believes that the Fed will cut rates further during the year, possibly by 25 basis points. Traders use CME Group's FedWatch tool to assess the probability of a policy change. While expectations for a 50 basis point cut fell to 35.4 per cent, the market still widely expects the Fed to act again in the fourth quarter of this year.
For gold traders, the price of gold is closely linked to Federal Reserve policy, especially in the context of interest rate decisions. Although Powell's hawkish tone has dampened the market's optimistic expectations for interest rate cuts in the short term, if future economic data does not perform as expected, the Fed may readjust its policy, which will bring upward momentum to gold prices.
If the ISM non-manufacturing PMI and monthly non-farm payrolls report beat expectations again this month, the dollar is expected to strengthen further, weighing on gold in the short term. But he also pointed out that with rising global economic uncertainty, especially the continued low inflation in the United States, the Federal Reserve's policy may gradually shift to easing in the coming months, which will provide long-term support for gold.
Technical analysis: Key levels and market sentiment
From a technical point of view, gold prices remained near the $2,624 to $2,625 range on October 1, which is seen as an important support level. If gold breaks below this support, it could trigger a sharper decline, with targets pointing to $2,600 or even down to the $2,535 to $2,530 range.
On the other hand, resistance above the price of gold is concentrated in the $2,656 to $2,657 area. A break above this resistance would see gold climb further to $2,672 and even challenge last week's record high of $2,685. If it breaks above $2,700, gold could start a new rally.
Institutional analysts generally believe that the short-term trend of gold prices still depends on the performance of global macroeconomic data, especially the release of economic data in the United States. With the release of ISM manufacturing PMI and non-farm payrolls this week, sentiment could change again.
Market outlook: Where will gold go from here?
Overall, although the short-term rebound of the US dollar has put some pressure on gold, the market's expectations of the Fed's policy shift to easing and global geopolitical tensions still provide strong support for gold. In the long run, gold prices are expected to gain more room to rise against the backdrop of further interest rate cuts and rising safe-haven demand.
For traders, the core of the current market remains the focus on the Fed's policy moves and global risk events. In the short term, gold prices are likely to trade in the $2,600 to $2,700 range, and as macro data gradually comes out, the market will make a clearer judgment on the direction of the next few months.
It is important to note that while gold is currently showing strong support, market volatility has increased and the direction of gold prices in the coming months will face greater uncertainty. Therefore, investors need to be cautious when placing gold long or short positions, focusing on the combined impact of the Fed's policy signals and global risk factors.
In early October, the gold market was driven by both Powell's speech and geopolitical risks. While the dollar has strengthened, safe-haven demand for gold remains. While gold prices may face pullback pressure in the short term, the market's interest rate outlook and global risk events will continue to provide support for gold in the medium to long term. Traders will need to pay close attention to the performance of US economic data to grasp further changes in the gold market.
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