Gold Analysis: Election Uncertainty and Fed Rate Decision Poised to Drive XAU’s Next Move

Gold Prices Edge Up as Markets Await U.S. Election and Fed Rate Decision

Gold prices saw a slight uptick on Monday, reflecting a cautious stance as traders anticipate pivotal events this week—the U.S. presidential election on Tuesday and the Federal Reserve’s interest rate decision on Thursday. While gold remains stable, early trading hinted at a downside bias with prices briefly dipping to a new low before stabilizing above key support levels.

At 11:26 GMT, XAU/USD is trading $2737.89, up $1.44 or +0.05%.

Gold Faces Key Resistance Levels as Momentum Remains Fragile

Gold is currently trading on the weaker side of a minor pivot at $2749.47, which serves as resistance. The recent price action follows last week’s reversal from the $2790.17 level, which has led to profit-taking among traders. This momentum suggests that if gold continues downward, it may test the main bottom at $2708.76. A break below this level could see the price challenge the intermediate 50% retracement level at $2697.28, which could open the door to a further decline toward the 50-day moving average around $2628.78.

Election and Fed Policy Remain in Focus for Gold Traders

Investor sentiment is particularly cautious as the U.S. presidential race between Democratic candidate Kamala Harris and Republican Donald Trump remains too close to call. Markets have shown divergent expectations for gold based on the election outcome: a Trump win is viewed as potentially accelerating gold toward $2900 per ounce, driven by his inflationary policies, while a Harris victory may bring a temporary dip as traders price in a continuation of current policies.

This election uncertainty also coincides with the Federal Reserve’s policy meeting, where a rate cut of 0.25% is expected. Fed Chair Jerome Powell’s post-decision commentary could provide further insight into the Fed’s economic outlook and future rate paths. With nearly 100% probability assigned to the rate cut, traders expect Powell to hint at additional rate cuts if economic data continues to show weakness.

Weaker Dollar and Treasury Yields Support Gold Demand

The U.S. dollar fell 0.6% on Monday, hitting a two-week low, which has made dollar-priced gold more attractive to international buyers. The dollar index dropped to 103.63, while the dollar slid against the yen and euro. The softer dollar, along with lower Treasury yields, which saw the 10-year yield fall by six basis points to around 4.3%, bolsters gold’s appeal as an inflation hedge and a safe-haven asset.

In China, expectations of more fiscal stimulus from the National People’s Congress meetings this week add to the broader support for precious metals. China’s commitment to continued fiscal support could indirectly support gold demand as part of a stable investment landscape.

Market Forecast: Downside Risk for Gold if Key Support Fails

Given the mix of profit-taking and potential election volatility, gold faces increased downside risks if it fails to hold above $2708.76. A break below this key level could see prices testing $2697.28, with an acceleration toward $2628.78 likely if the selling pressure persists.

However, a Trump win and sustained dollar weakness could reinforce gold’s upward potential, with a target of $2900 if bullish drivers align. For now, traders may see a short-term bearish trend unless election outcomes or Fed commentary provide clear support.