Gold rallied and fell, beware of short-term adjustments

Gold (XAU/USD) settled in Asia on Thursday and hit a record high on Wednesday, holding above $3,650. The Federal Reserve's dovish interest rate cut stance has supported non-yielding asset gold, but the dollar's recovery from multi-year lows has limited the room for gold prices to rise further.

The Federal Reserve cut its key interest rate by 25 basis points to a range of 4.00% -4.25% on Wednesday and signaled two more rate cuts are possible this year to counter a weak labor market.

Jerome Powell, chairperson of the Federal Reserve, said the rate cut was risk management and there was no need to rush into action, and the Fed would take a "meeting-by-meeting" approach to observing the path of interest rates. A quick rebound in dollar and Treasury yields after an initial decline partially offset gold's gains.

Geopolitical risks have also supported gold, including the intensifying conflict between Russia and Ukraine, tensions in the Middle East, and Europe's response to energy dependence and war situations.

German Chancellor Merz warned Russia to repeatedly test the limits of European Union airspace, and European Union Commission President von der Leyen called for a faster halt to Russian gas and oil imports. Israel's military escalation in Gaza has also attracted international attention.

On the economic front, the Federal Reserve released its latest economic forecast: the US economy is expected to grow by 1.6% in 2025, 1.8% in 2026, and 1.9% in 2027; core PCE inflation is expected to be 3.1% in 2025, 2.6% in 2026, and 2.1% in 2027. The long-term goal is to maintain 2%.

Markets then focused on Thursday's U.S. jobless claims and economic data such as the Philadelphia Federal Reserve's manufacturing index, as well as policy developments at the Bank of England and the Bank of Japan, which may have short-term volatility in gold prices.

XAU/USD showed a clear bullish trend on the daily line, and began to correct after touching a record high of $3,707 on Wednesday. The price gained support near $3,645, which was originally a previous resistance level and is now a key support. Short-term downside space is limited.

The daily K-line shows successive positive breakouts and subsequent small pullbacks, forming a typical bullish flag finishing structure. The daily RSI is located in the overbought area, indicating short-term profit-taking pressure, but the overall trend is still bullish.

Short-term resistance is concentrated in the $3,680 and all-time high $3,700-3,707 area. Once it breaks through this range, gold may continue its recent upward momentum. If it falls below the $3,645 support, the short-term target may drop to the $3,610-3,600 area.

Editorial opinion:

Gold is currently trading sideways at a high level near $3,650, with fundamental bullish slightly prevailing. If the dollar falls further or geopolitical risks escalate, XAU/USD is expected to hit new highs again.