Gold Price Moves: How the Federal Reserve Impacts the Market
Gold Moves
Gold enters a bullish consolidation phase after hitting a new all-time high earlier this Tuesday.
Rising Fed rate cut expectations continue to weaken the USD, supporting the non-yielding commodity.
Extremely overbought conditions may limit further upside ahead of key central bank events this week.
Gold (XAU/USD) pulled back slightly after reaching a fresh record high near the $3,689–3,690 range during the Asian session on Tuesday, as some repositioning took place ahead of major central bank events. Market attention is now on the US Federal Reserve (Fed), which is set to announce its decision at the end of a two-day meeting on Wednesday. Analysts expect a 25-basis-point rate cut amid signs of a softening job market, but investors will focus on updated economic projections and Fed Chair Jerome Powell’s tone at the post-meeting press conference. These cues on the Fed’s rate-cut path are likely to influence the US Dollar (USD) and provide fresh directional momentum for gold.
Additionally, upcoming events from other major central banks, including the Bank of Canada (BoC) policy update on Wednesday, the Bank of England (BoE) rate decision on Thursday, and the two-day Bank of Japan (BoJ) meeting concluding on Friday, could drive further volatility in gold prices. The recent pullback appears partly due to profit-taking following gold’s parabolic rise and overbought conditions on the daily chart. However, any significant corrective slide seems unlikely amid rising geopolitical tensions, which continue to support safe-haven demand for bullion. Traders may want to wait for strong follow-through selling before confirming that XAU/USD has topped out ahead of the psychologically important $3,700 level.
Daily Market Movers: Gold remains supported by a weaker USD amid dovish Fed expectations and ongoing geopolitical risks.
XAU/USD bulls pause during the Asian session on Tuesday after a recent all-time high, with downside supported by strong fundamentals.
Traders increased bets on aggressive Federal Reserve easing following a weaker-than-expected US Nonfarm Payrolls (NFP) report for August.
CME Group’s FedWatch Tool shows the US central bank is expected to lower borrowing costs three times this year.
The US Senate confirmed President Trump’s aide, Stephen Miran, to join the Fed Board of Governors amid a federal appeals court ruling protecting Fed Governor Lisa Cook.
A dovish Fed outlook continues to weaken the US Dollar (USD), providing a tailwind for non-yielding gold.
Rising geopolitical tensions, particularly the Russia-Ukraine conflict, further support gold prices. Russian forces launched a major attack on Zaporizhzhia after prior Ukrainian strikes on oil infrastructure.
Trump’s repeated threats of tougher measures against Russia maintain geopolitical risk in the market.
An emergency summit of Arab and Islamic country leaders condemned Israel’s attack on Hamas leaders in Doha, urging coordinated efforts to suspend Israel’s UN membership.
Tuesday’s US Retail Sales and Industrial Production data are unlikely to move markets significantly.
Investors will also monitor key central bank updates this week: Bank of Canada on Wednesday, Bank of England on Thursday, and Bank of Japan on Friday.
Gold Breaks Out of Bullish Flag, but Overbought Daily RSI Signals Caution
Gold surged overnight, marking a fresh breakout through a bullish flag pattern. However, the daily Relative Strength Index (RSI) remains well above 70, signaling extremely overbought conditions and suggesting caution before positioning for further gains. This indicates that XAU/USD may struggle to extend momentum beyond the $3,700 level, which now serves as a key pivot point.
On the downside, any meaningful corrective pullback is likely to attract new buyers, with support expected near the flag breakout around $3,645. Yet, follow-through selling that pushes prices below the $3,633 horizontal zone could drive gold down to the $3,610–$3,600 area. A decisive break below this level may open the door to deeper losses, potentially exposing the $3,500 psychological mark, with intermediate support near $3,562–$3,560.
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