Gold price recovers 1% after early week drop
Gold nears all-time high as markets await Fed rate decision.
Gold price has been on an upward path, gaining over 5% in January 2025, but now faces a crossroads influenced by equity market stability and expectations of U.S. monetary policy.
The precious metal has just touched a two-day high of $2,767, and while it's only 1% shy of its all-time peak from October 2024 at $2,790, several factors are at play that could dictate its next move.
In the previous trading session, gold managed a recovery of 1% from the 50-day EMA on the 4-hour chart after an early week drop marked by a bearish daily engulfing pattern. This bounce back aligns with the monthly uptrend, showcasing the metal's resilience. During today's Asian session on January 29th, gold's price action was somewhat contained, but in the European session, it's trading at $2,760.
Gold price dynamics (November 2024-January 2025). Source: TradingView.
The stability in equity markets generally poses a challenge for gold, as investors might see less need for safe-haven assets. However, a decline in U.S. Treasury bond yields and the market's betting on further rate cuts by the Federal Reserve this year are providing a counterbalance. The weakening U.S. dollar, which hit a one-month low, further bolsters gold's appeal as a non-yielding investment in a low-yield environment.
Gold price outlook hinges on potential Fed rate cut
The market's anticipation is now heavily focused on the Federal Reserve's decision. While the consensus is that the Fed will keep rates unchanged, despite urgings for immediate cuts by President Trump, the central bank's forward guidance on policy will be crucial. This decision could sway the U.S. dollar's direction and thus have a direct impact on gold prices.
Current technical indicators show bullish signals with both the daily and 4-hour Relative Strength Index (RSI) in bullish territory. Near-term support for gold stands at the 50 EMA on the 4-hour chart, around $2,740, indicating a strong base from which gold could potentially push higher if the Fed's outlook leans dovish.
So while gold benefits from a weaker dollar and expectations of monetary easing, the metal's path forward hinges on the Fed's next steps as investors wait to see how these macroeconomic elements will unfold.
China DeepSeek AI's sell-off led to a broader market downturn. As a result, gold prices dropped 2% from their January peak, hitting a four-day low of $2,730.
