Gold drops on strength in the Greenback following a dubious Fed rate cut


  • Fed left no real assurance of more cuts down the line were presented.
  • Gold spot prices dropped to a fresh low and the lowest levels since 13th August.
  • A 50% mean reversion of the late June swing lows to recent highs around 1470 guards the 19 July swing highs at 1,452.93.

Gold prices have dropped on the Federal Reserve decision whereby no real assurance of more cuts down the line were presented. However, the door has been left open which limits the downside potential in this move.

"Essentially, the Federal Reserve has provided a confused message of upwardly revising its GDP forecast despite being concerned about growth while ignoring the recent pick-up in inflation completely. Moreover, there is no consensus on additional rate cuts being needed," analysts at ING Bank argued.

Spot prices dropped to a fresh low and the lowest levels since 13th August. Gold futures ended higher for the third session in a row ahead of the event, indicating that the market is bullish overall. December gold on Comex climbed $2.40, or 0.2%, to settle at $1,515.80 an ounce, trading about 1% higher week to date.

Expect that further weakness on the economic data front will ultimately catalyze further gains

"With gold prices still holding north of the $1500/oz range, despite the market significantly pairing back its easing expectations, we expect that further weakness on the economic data front will ultimately catalyze further gains as the path of least resistance for gold and friends remains to the upside," analysts at TD Securities explained. 

Gold levels

The bearish pin bar and subsequent negative close at the end of the week painted a compelling bearish case on the daily chart. Bears are back on control but need a close below the trendline support. A 50% mean reversion of the late June swing lows to recent highs around 1470 guards the 19 July swing highs at 1,452.93. On the upside, the 1,550 level is still the target to breach which then opens prospects for 1,590 as the 127.2% Fibo target area. 

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