Gold high volatility waiting for the direction to break through the window

Gold prices remained weak around $4,210 in Asian trading on Wednesday as the market remained highly cautious about the Federal Reserve's upcoming policy stance. Traders widely expect the Fed to cut interest rates for the third time this year, but are more concerned that the policy guidance after the rate cut may appear "hawkish".

According to data from relevant institutions, traders currently expect the probability of a rate cut at this meeting to be close to 90%, up from 71% earlier this month, indicating that the market has highly priced this rate cut.

But the focus is not on the rate cut itself, but on the future path.

"Hawkish rate cuts" are expected to strengthen, and gold is under short-term pressure

Although interest rate cuts are theoretically bullish for gold, the market is concerned that the Federal Reserve will use language to signal a pause in future interest rate cuts, thereby suppressing gold prices. Investors inDBG ForexThe platform observed that the current gold long-short game is rather intense.

Federal Reserve Chairperson Jerome Powell's remarks at a press conference are expected to dominate the short-term direction of gold.

"The most likely outcome is a'hawkish rate cut ', in which the Fed cuts rates, but at the same time implies that further easing is not necessarily necessary in the future." - Bill English, a Yale professor and former head of monetary affairs at the Federal Reserve

The so-called "hawkish rate cut" means that although the Federal Reserve cuts interest rates, it emphasizes that policy space is limited and the pace of easing in the future will slow or pause. For gold, this is equivalent to weakening its most important support factor - the low interest rate environment.

The trend of global central bank holdings provides medium- and long-term support

In contrast to the hawkish signals that the Federal Reserve may release, the world's major central banks continue to increase their gold reserves, providing medium-term bottom support for gold prices.

Asian central banks have increased their gold holdings for the 13th consecutive month, according to official data, adding 30,000 ounces of reserves last month, bringing their holdings to 74.12 million ounces.

Behind this behavior, it reflects the increased demand for long-term stores of value by global central banks, and also reflects the growing strategic value of physical assets in a period of high uncertainty about global monetary policy.

"The continuous increase in central bank holdings shows that they remain defensive against long-term inflation and economic risks, which will limit the absolute downside of gold." - an analyst at a commodity research firm

Policy statements and reserve trends together shape the direction of gold prices

In the short term, gold is highly dependent on the Fed statement and Powell's press conference. If the policy tone remains cautious or even hawkish, gold may continue to be under pressure; but if the language suggests that there may still be room for easing in the future, gold prices are expected to stop falling.

In the medium term, continued central bank buying and resilient global demand have given gold a solid long-term support range.

Judging from the trend of the gold daily level, the current price structure shows signs of "the center of gravity moving down after the high shock", and the technical side is entering the direction selection stage. After the gold price reached the high point of the stage, it was blocked near the upper pressure zone many times, and the K line continuously left a long upper shadow, reflecting that the bulls' momentum weakened significantly.

The short-term moving average has started to turn sideways or even slightly downward, indicating that the upward trend has slowed down; the MACD indicator has contracted and is close to the zero axis, indicating that the long and short forces are approaching equilibrium.

At the same time, the key support levels below are concentrated in the previous pullback lows and the Bollinger Band mid-rail area. Once it falls, it may trigger further technical selling. Overall, gold is in a range-bound state of "waiting for fundamental catalysts". The daily chart indicates that the short-term is weak but does not rule out a directional breakthrough after the data is released.

editorial opinion

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From the perspective of the overall market structure, the core contradiction of gold is that the path of the US dollar and interest rates affects its short-term fluctuations, while the global central bank's holdings and safe-haven demand determine the medium and long-term trends. For investors who pay attention to DBG foreign exchange, the current gold price is in a critical window period.

The current "hawkish interest rate cut" will only bring temporary pressure on gold prices, but will not change the structural demand for gold as a reserve asset. In the future, we need to focus on tracking the Federal Reserve's hints on the follow-up policy path and whether the pace of global central bank holdings continues to be strong.