Will Gold's Successfully Rebound Depend on the Outcome of the Fed Interest Rate Meeting？

In the early hours of tonight (September 21, Beijing time), the highly anticipated Federal Reserve interest rate meeting will take place, leaving investors wondering about the future direction of gold. Gold has been trading in a range between $1921 and $1930 this week, as traders await the outcome of the meeting.

Currently, the CME Group's FedWatch tool indicates a 99% probability of the Fed maintaining the benchmark interest rate in September, while the probability of a rate hike in November stands at 32%. Additionally, pricing in the money markets suggests that the US central bank will pause its rate hikes in September. However, during this interest rate meeting, the comments made by Fed Chair Powell could serve as crucial information for the future trajectory of gold prices. If Powell signals a hawkish stance, suggesting the possibility of further rate hikes or viewing the current high rate levels as sustainable for an extended period, it would be bearish for gold.

(Source: CME FedWatch)

Previously, economists from an Australian bank remarked, "If the Fed does not provide any unexpected bearish signals for gold, it may continue to trade within the wide range of $1900 to $1940. Breaking above the recent high of $1940 could elevate bullish sentiment."

We believe that recent data such as CPI and PPI indicate stubborn inflation in the US economy. While the market has already priced in the Fed keeping rates unchanged in this meeting, if the meeting hints at the possibility of future rate hikes, gold's short-term trend could experience an initial rise followed by a decline. The likelihood of the meeting signaling a dovish rate cut is low; however, any indication of rate cuts within the year would benefit gold's upward movement.

From a technical perspective, gold has been trading above the 200-day MA and has broken its downtrend since May, indicating some level of support from the bulls. However, caution should be exercised regarding the bearish signals from the MACD and RSI (54). Therefore, the success of this round of gold rebound will depend on the guidance provided by the Fed meeting. Support is at $1922, while resistance is seen at $1940.

Source: Mitrade Webtrader