Gold ends two days of falling trend, are bulls out of disappointment?
2025-09-20 00:53:18
Gold (XAU/USD) recovered some of its losses during U.S. trading on Friday, September 19th, snapping a two-day losing streak following a mid-week volatile reaction to the Federal Reserve's interest rate decision. Spot gold traded around $3,668, up nearly 0.65%.
On Wednesday, the U.S. central bank cut the federal funds rate by 25 basis points to a range of 4.00%-4.25%, a move that was fully priced in by the market. Following the announcement, gold prices briefly surged to a record high near $3,707, but the gains quickly retreated after Fed Chairman Powell's less dovish tone at the press conference than expected, triggering a sharp rebound in the U.S. dollar and U.S. Treasury yields.
Chairman Powell said the Fed does not see the need for a rapid adjustment in interest rates, describing the rate cut as a "risk-management cut" aimed at addressing signs of a slowing labor market and providing a cushion for the economy. He added that policy "is not on a default path" and will continue to be data-dependent, suggesting the Fed will adopt a cautious approach rather than embark on an aggressive easing cycle.
Spot gold rebounded on Friday despite a stronger dollar and rising Treasury yields, as traders weighed the impact of the Federal Reserve's monetary policy outlook. The market has begun pricing in the possibility of two more rate cuts before the end of the year, which in turn cushioned gold's downside risks; however, elevated yields and a strong dollar constrained the short-term outlook, limiting further gains.
Dollar strengthens as yields rise, Fed predicts gradual easing
Minneapolis Federal Reserve Bank President Neel Kashkari said Thursday that the neutral interest rate may have risen to around 3.1%, meaning monetary policy is less restrictive than previously expected. He supported this week's rate cut and believed that two more 25 basis point cuts this year would be appropriate given the risk of a significant rise in unemployment. Kashkari emphasized the need for policy flexibility, noting that the Fed could pause rate cuts if the labor market strengthens or inflation reaccelerates, but also that the pace of rate cuts could accelerate if the employment situation deteriorates further. He added that he is open to raising rates again if economic conditions warrant.
Federal Reserve Board Governor Milan expressed no concern on Friday about tariffs triggering inflation, arguing that the United States is more resilient and flexible than its trading partners. The policy rate, which is well above neutral, suggests a highly restrictive monetary policy. The longer the Fed maintains tight policy, the greater the risks to the job market. Markets may have anticipated a more dovish signal from the Fed meeting.
The US dollar index (DXY) continued its rebound momentum after the Fed's decision, recovering from its low since February 2022 (around 96.22). The index hovered around 97.62, close to its five-day high.
According to the CME FedWatch tool, the market is pricing in a 91% probability of a 25 basis point rate cut in October and a nearly 80% probability of another rate cut in December. This is consistent with the Fed's updated dot plot, which indicates an additional 50 basis points of easing for the rest of the year.
Technical analysis: Spot gold consolidates around $3,650
Spot gold is testing key support near $3,650, which coincides with the 50-period simple moving average (SMA) on the 4-hour chart, making it an area of focus. The price is currently trading below the 21-period simple moving average, which provides immediate resistance at $3,668, making the short-term outlook bearish.
The Relative Strength Index (RSI) on the 4-hour chart is hovering around 49, reflecting neutral momentum, suggesting that the market is in a consolidation phase rather than showing a strong directional bias.
On the downside, $3,630 has become a short-term bottom, with multiple lower shadows indicating bullish entry on the dip. A break below this level would expose stronger support at $3,600. A clear break below $3,600 would signal a shift in market structure, potentially opening the way for a deeper correction.
On Wednesday, the U.S. central bank cut the federal funds rate by 25 basis points to a range of 4.00%-4.25%, a move that was fully priced in by the market. Following the announcement, gold prices briefly surged to a record high near $3,707, but the gains quickly retreated after Fed Chairman Powell's less dovish tone at the press conference than expected, triggering a sharp rebound in the U.S. dollar and U.S. Treasury yields.
Chairman Powell said the Fed does not see the need for a rapid adjustment in interest rates, describing the rate cut as a "risk-management cut" aimed at addressing signs of a slowing labor market and providing a cushion for the economy. He added that policy "is not on a default path" and will continue to be data-dependent, suggesting the Fed will adopt a cautious approach rather than embark on an aggressive easing cycle.
Spot gold rebounded on Friday despite a stronger dollar and rising Treasury yields, as traders weighed the impact of the Federal Reserve's monetary policy outlook. The market has begun pricing in the possibility of two more rate cuts before the end of the year, which in turn cushioned gold's downside risks; however, elevated yields and a strong dollar constrained the short-term outlook, limiting further gains.
Dollar strengthens as yields rise, Fed predicts gradual easing
Minneapolis Federal Reserve Bank President Neel Kashkari said Thursday that the neutral interest rate may have risen to around 3.1%, meaning monetary policy is less restrictive than previously expected. He supported this week's rate cut and believed that two more 25 basis point cuts this year would be appropriate given the risk of a significant rise in unemployment. Kashkari emphasized the need for policy flexibility, noting that the Fed could pause rate cuts if the labor market strengthens or inflation reaccelerates, but also that the pace of rate cuts could accelerate if the employment situation deteriorates further. He added that he is open to raising rates again if economic conditions warrant.
Federal Reserve Board Governor Milan expressed no concern on Friday about tariffs triggering inflation, arguing that the United States is more resilient and flexible than its trading partners. The policy rate, which is well above neutral, suggests a highly restrictive monetary policy. The longer the Fed maintains tight policy, the greater the risks to the job market. Markets may have anticipated a more dovish signal from the Fed meeting.
The US dollar index (DXY) continued its rebound momentum after the Fed's decision, recovering from its low since February 2022 (around 96.22). The index hovered around 97.62, close to its five-day high.
According to the CME FedWatch tool, the market is pricing in a 91% probability of a 25 basis point rate cut in October and a nearly 80% probability of another rate cut in December. This is consistent with the Fed's updated dot plot, which indicates an additional 50 basis points of easing for the rest of the year.
Technical analysis: Spot gold consolidates around $3,650
Spot gold is testing key support near $3,650, which coincides with the 50-period simple moving average (SMA) on the 4-hour chart, making it an area of focus. The price is currently trading below the 21-period simple moving average, which provides immediate resistance at $3,668, making the short-term outlook bearish.
The Relative Strength Index (RSI) on the 4-hour chart is hovering around 49, reflecting neutral momentum, suggesting that the market is in a consolidation phase rather than showing a strong directional bias.
On the downside, $3,630 has become a short-term bottom, with multiple lower shadows indicating bullish entry on the dip. A break below this level would expose stronger support at $3,600. A clear break below $3,600 would signal a shift in market structure, potentially opening the way for a deeper correction.
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