Gold prices slipped below the $3,400 mark early Wednesday, retreating from recent highs as risk sentiment stabilizes. Market participants are now focused on the upcoming U.S. Federal Reserve policy announcements, while geopolitical tensions between Israel and Iran continue to cast a shadow.
Gold Dips Ahead of Fed Decision
Despite a slight pullback in the U.S. dollar, gold prices declined in Asian trading as investors reposition themselves ahead of the Fed’s interest rate decision later today. The easing of risk aversion has reduced demand for safe-haven assets, including gold and the greenback.
Concerns over potential U.S. military action against Iran have eased following statements from U.S. President Donald Trump calling for Iran’s unconditional surrender and a National Security Council emergency meeting on Tuesday. Reports from Israeli Channel 12 suggesting possible U.S. involvement in a conflict with Iran did little to escalate immediate market fears.
The dollar gained strength on Tuesday amid a global flight to safety due to ongoing trade and geopolitical uncertainties, allowing gold to hold firm despite rising Middle East tensions. Meanwhile, mixed U.S. retail sales data failed to shake confidence in the dollar.
Fed Rate Decision in Focus
The spotlight now turns to the Federal Reserve’s monetary policy announcement expected later in the day. Markets have fully priced in no change to the benchmark interest rate, with the Fed anticipated to maintain the federal funds rate in the current range of 4.25%-4.50%.
Investors will be closely analyzing the Fed’s updated economic projections—often referred to as the Dot Plot—and Chair Jerome Powell’s press conference for clues on the future path of monetary policy.
The Fed is expected to reaffirm its cautious stance, with projections suggesting two 25 basis point rate cuts in the latter half of 2025, potentially beginning in September.
Should the Fed signal a dovish shift in its policy outlook or lower inflation and labor data prompt softer guidance, the dollar may weaken, providing a boost to gold prices. Conversely, if the Fed expresses concerns about rising oil prices driven by Middle East instability, which could fuel inflation, the dollar might strengthen, pressuring gold prices downward—especially if the projections indicate fewer rate cuts than anticipated.
Technical Analysis
Technically, gold maintains a bullish outlook. The 14-day Relative Strength Index (RSI) remains above the neutral midline near 55, supporting upward momentum.
Gold continues to defend its previous resistance-turned-support at $3,377, coinciding with the 23.6% Fibonacci retracement of April’s record rally.
If the Fed’s outcome is perceived as hawkish, gold will need to hold above this support to avoid a further decline. The next key support levels are the 21-day Simple Moving Average (SMA) at $3,341 and the 50-day SMA at $3,308, following a break below the $3,350 psychological level.
On the upside, surpassing the static resistance at $3,440 is critical for a sustained rally. Should gold clear this hurdle, the next targets are the two-month highs near $3,453, with potential to challenge the all-time high around $3,500.
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