Gold News: Strong U.S. Dollar Caps Rally, Traders Eye Fed Rate Cut Impact

Gold Prices Steady as Traders Eye U.S. Dollar Strength and Fed Rate Cuts

Gold prices held steady on Tuesday as traders responded to a strong U.S. dollar and market speculation on upcoming Federal Reserve rate cuts. After hitting a record high of $2,685.42 last month, gold has since settled into a range between $2,685.64 and $2,604.39. The current market is fluctuating around $2,645.01, the mid-point of this range, with price direction depending on whether gold can hold above this key pivot.

At 12:35 GMT, XAU/USD is trading $2655.55, up $6.77 or +0.26%.

Gold Faces Headwinds from Strong U.S. Dollar

The U.S. dollar, buoyed by expectations of future rate cuts by the Federal Reserve, hovered near a two-month high on Tuesday, creating resistance for gold prices. A stronger dollar typically makes gold more expensive for holders of other currencies, limiting demand. The dollar index was last at 103.12, close to its recent peak of 103.36, which represents a 2.5% gain from its September 27 bottom at 100.157.

This dollar strength, alongside higher U.S. Treasury yields, presents a challenging environment for gold in the short term. Independent analyst Ross Norman noted the pressure on gold, citing “profit-taking and higher Treasury yields,” which have dampened further upward movement for the metal after its nearly 30% gain so far this year.

Federal Reserve Rate Cuts and Economic Data in Focus

Traders are closely watching the Federal Reserve’s next moves, with an 87% chance of a 25-basis-point rate cut in November according to the CME FedWatch tool. Although Fed Governor Christopher Waller urged caution on additional rate cuts, the prospect of easing is still expected to support gold prices. Non-yielding assets like gold tend to benefit from lower interest rates, as they reduce the opportunity cost of holding bullion.

Upcoming U.S. economic data, including retail sales and industrial production, could further influence market sentiment. The Fed’s policy decisions are also linked to the central bank’s inflation target of 2%, which may prompt additional cuts if inflation trends downward.

Technical Outlook and Support Levels

From a technical perspective, gold is currently testing the $2,645.01 pivot. A sustained move above this level could drive prices toward the upper range at $2,685.64. However, if support at $2,645.01 fails, gold may retreat to the support cluster between $2,616.25 and $2,604.39. The major support remains the 50-day moving average at $2,555.80, a key level to watch in the event of further downside pressure.

Gold Prices Forecast

In the short term, gold faces a mixed outlook. While the strong U.S. dollar and rising Treasury yields present immediate resistance, the likelihood of further Federal Reserve rate cuts by year-end is expected to provide underlying support. Traders should remain cautious, but a break above $2,645.01 could signal bullish momentum, setting up gold to challenge its previous highs near $2,685.64 before the end of the year.