Gold (XAU/USD) resumed its bullish trajectory on Wednesday, stalling the overnight pullback from the all-time high recorded the previous day. The precious metal’s resilience comes amid a complex interplay of fundamental and technical factors, including Fed rate cut expectations, safe-haven demand, geopolitical risks, and political uncertainties.
Despite a modest USD uptick and positive risk sentiment acting as near-term headwinds, the underlying support for Gold remains strong. The brokers at Solancie outline the most important details of the subject in this article.
Gold Holds Firm Near $3,620
During the Asian trading session, Gold attracted dip-buying interest around the $3,620 level, marking a temporary halt to the retracement from the record highs. Market participants are increasingly confident that the US Federal Reserve (Fed) will adopt a more dovish monetary policy stance, with markets pricing in three rate cuts by year-end.
The yellow metal benefits from being a non-yielding asset, which becomes more attractive when interest rates are expected to decline, and real yields remain negative. In addition to these monetary policy drivers, persistent trade-related concerns, escalating geopolitical tensions, and political turbulence in France and Japan have bolstered the safe-haven appeal of Gold.
Fed Rate Cut Bets Provide Key Support
The Federal Reserve’s policy outlook continues to be a critical driver for the XAU/USD pair. Last Friday’s weaker-than-expected US jobs data indicated a softening labor market, reinforcing market expectations of three interest rate reductions through the end of 2025.
The CME Group’s FedWatch Tool further highlighted a small probability of a jumbo 50-basis-point rate cut at the upcoming FOMC policy meeting, suggesting that the Fed could act decisively to maintain economic momentum.
A dovish Fed is inherently supportive of Gold, as lower interest rates reduce the opportunity cost of holding non-yielding assets. This dynamic encourages traders to accumulate Gold on dips, particularly around key technical levels such as the $3,600 round figure.
The possibility of multiple rate cuts has been further underscored by market commentary noting that Federal Reserve independence remains intact despite political pressures, reinforcing the perception that monetary easing is likely.
USD Dynamics and Market Risk Sentiment
While Gold remains fundamentally supported, the US Dollar (USD) has staged a partial recovery from its July 28 lows, partly due to repositioning trades ahead of critical US inflation data. A firmer USD typically weighs on Gold, as the commodity becomes more expensive for foreign buyers.
In addition, Wall Street indices recently posted record closing highs, with positive spillovers boosting Asian equities. This broadly risk-on environment could cap Gold’s upside temporarily, as investors may shift funds away from safe-haven assets toward equity markets.
Market participants are closely watching upcoming US macroeconomic data, including the Producer Price Index (PPI) and Consumer Price Index (CPI), as these releases will provide fresh impetus for USD movements and potentially dictate the next directional leg for XAU/USD.
Technical Analysis: Consolidation and Key Levels
From a technical perspective, Gold remains in overbought territory on the daily Relative Strength Index (RSI), signaling a potential near-term consolidation or minor pullback. Immediate support lies near $3,600, followed by the weekly low around $3,580. Breaching this support could lead to a corrective slide towards $3,565–$3,560, with the next intermediate support at the prior swing low of $3,510.
On the upside, resistance levels include the $3,640–$3,645 zone, followed by the all-time peak near $3,675. Further bullish momentum could drive Gold toward the psychologically significant $3,700 mark, although traders are likely to exercise caution given overbought conditions.
Technical traders may also monitor moving averages, Fibonacci retracement levels, and trendline support to gauge potential entry points. Any consolidation near $3,600 could present opportunities for tactical buying, especially in anticipation of macro-driven volatility around upcoming US inflation releases.
Conclusion: Fundamentals Favor Bulls, Technicals Suggest Caution
In conclusion, Gold has regained positive traction amid Fed rate cut bets, safe-haven demand, geopolitical tensions, and political uncertainties. The fundamental backdrop remains tilted toward bullish XAU/USD sentiment, with dip-buyers showing interest near $3,620.
However, technical indicators such as overbought RSI and key resistance zones caution against aggressive bullish positions. USD strength, equity market gains, and the upcoming US inflation data may introduce volatility, requiring traders to maintain a balanced approach.
For the near term, $3,600 support and $3,640–$3,645 resistance will remain critical levels, with the $3,700 round figure acting as a potential psychological barrier. Gold’s ability to navigate macroeconomic, geopolitical, and technical pressures will determine whether the recent breakout momentum can extend further or whether consolidation dominates the market.
