On the eve of the Federal Reserve's interest rate decision, gold remains high and volatile

Gold prices retreated to $3,680 in Asian trading on Wednesday from the all-time high hit on Tuesday, ending a three-day rally. The dollar rallied slightly ahead of the key Federal Reserve interest rate decision, putting some pressure on gold, while the market's profit-taking was also the reason for the short-term pullback.

Nonetheless, markets still expect the Fed to cut rates by at least 25 basis points after the two-day meeting, and possibly two more before the end of the year. Investors await more guidance from Powell's post-meeting press conference and economic forecasts (dot plot), which will affect the dollar and indirectly support gold.

The U.S. Census Bureau reported that retail sales rose 0.6% month-on-month in August, indicating that U.S. consumer spending remains resilient despite a slowing economy, persistent inflation, and a weakening labor market.

However, the market is almost certain that the Federal Reserve will adopt accommodative policies to support a softening labor market, which is also supportive of non-yielding asset gold.

Meanwhile, geopolitical tensions continued to provide safe haven support for gold. Ukraine launched an attack on a large Russian refining facility, and Russia took control of the village of Novomikolaivka near Donetsk. Israel launched a ground offensive in the Gaza Strip and penetrated deep into the urban core. Tensions and market caution limited further pullbacks in gold.

From a technical standpoint, the daily level support near $3645 (this week's flag-shaped break support) and the $3633 level, if broken, may drop to $3610-3600; further support in the $3562-3560 area, the psychological barrier of $3500 is still defensive.

The above resistance level of $3,700 is a short-term key resistance level, and the bulls may continue their upward trend after breaking through; the next pressure area is slightly above the recent high.

The daily RSI is overbought, leading to short-term profit taking; the Zhou flag breakout still suggests that the pullback can be seen as a low buying opportunity. Prices remain above the short- to medium-term moving average, with bulls still dominant and limited room for pullbacks.

Overall, the short-term pullback in gold is a profit-taking, solid support, and can still be seen as a bargain buying opportunity, but it is necessary to pay attention to the immediate impact of the Federal Reserve statement and geopolitical events on the market.

Editorial opinion:

The short-term trend of gold was affected by the recovery of the US dollar and profit-taking, but the Federal Reserve's interest rate cut expectations and safe-haven demand remain the main support: the Fed's policy expectations are dovish to limit the further strengthening of the US dollar, which is conducive to the maintenance of non-income asset gold at a high level; geopolitical tensions provide safe-haven buying support for gold, limiting the downward space.