Market update: gold prices poised for rebound with Fed rate cuts

Gold reaches new multi-decade high

Earlier this week, gold reached a new multi-decade high, breaking out of a range that had persisted since late March. The ascent above the 20-day and 50-day moving averages at the start of the month enabled the precious metal to challenge and subsequently surpass the mid-May high.

Despite a sell-off in the latter half of the week, which lacked a fundamental driver, any additional declines are expected to draw buyers back. The US interest rate outlook appears favorable for gold, with two, and potentially three, quarter-point rate cuts now anticipated.

The first cut is fully expected at the 18 September Federal Open Market Committee (FOMC) meeting, coinciding with the release of the latest Summary of Economic Projections.

Meeting and dates data chart

Gold techinical anaylsis

Currently, gold is trading around $2,400/oz, with any further sell-off likely to be limited. Previous resistance levels, now support, between $2,350/oz and $2,370/oz, also include the short- and medium-term SMAs, which are expected to provide additional support.

Gold daily chart

Gold client sentiment analysis

Retail trader data indicates that 52.21% of traders are net-long, with the ratio of traders long to short at 1.09 to 1. The number of traders net-long is 2.65% lower than yesterday and 1.64% higher than last week, while the number of traders net-short is 11.07% lower than yesterday and 7.53% lower than last week.

We typically adopt a contrarian view to crowd sentiment, and the current predominance of net-long traders suggests that gold prices may continue to fall. The increase in net-long positions from yesterday and last week, combined with current sentiment, strengthens our gold-bearish contrarian trading bias.

Gold client positioning chart

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