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Gold prices fall ahead of FOMC minutes and Powell’s speech

Gold prices fell slightly in early U.S. trading on Wednesday as traders remained cautious ahead of key Federal Reserve announcements that could affect market direction.

Tensions rise ahead of FOMC minutes and Jackson Hole symposium

Market participants are eagerly awaiting the release of the minutes of the Federal Open Market Committee (FOMC), which are due to be released later today. These minutes are expected to provide important insights into the Federal Reserve's policy direction, particularly with regard to a possible rate cut in September.

Adding to the anticipation is the fact that Fed Chairman Jerome Powell will speak on Friday at the Jackson Hole Symposium, a platform known for its major market-moving statements.

Investor behavior reflects strategic positioning

  • Increased long positions: Traders increased their long positions in gold by 18%, entering into over $6.7 billion worth of new futures contracts last week.
  • Gold ETFs as a hedge: US investors are using gold ETFs as a hedge against a potentially weaker US dollar, as lower interest rates are expected to drive up the price of gold.
  • Seasonal demand: Upcoming seasonal events such as the Indian wedding season and Christmas are expected to further boost gold demand. Chinese investors are also increasingly investing in gold as they shift away from real estate and local financial institutions.

Gold price fluctuates amid expectations of Fed rate cut

Gold prices have been volatile as investors anticipate a possible 25 basis point rate cut by the US Federal Reserve in September. That expectation drove gold prices to a new record on Tuesday, helped by a 70 percent probability of a rate cut according to CME Group's FedWatch tool. Since then, however, the precious metal has lost momentum and faces challenges from overbought market conditions.

Data from TD Securities shows that gold futures and options markets are strongly positioned, limiting further upside. Fed Governor Michelle Bowman also warned that inflation remains above the Fed's 2% target, dampening expectations for immediate rate cuts.

Gold price (Source: PR)

Gold price chart – Source: TradingView

Gold is facing significant resistance at the $2,530 level, which coincides with the upper boundary of an ascending channel on the 4-hour chart. This level has consistently acted as a ceiling and limited further upside. However, gold has room to fall to the $2,485 area, a critical support zone that is likely to sustain the uptrend.

The support zone between $2,475 and $2,485 is crucial to maintain the overall positive momentum. The 50-day EMA, currently at $2,478, further strengthens this support and increases the chances of an uptrend continuation if gold stays above this level.

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Diploma: Consider entering buy positions above the $2,475-$2,485 support zone to profit from the ongoing uptrend.

This article is for informational purposes only. The opinions and analysis contained herein are those of the author and do not constitute financial advice. The Jerusalem Post (JPost.com) does not endorse or recommend any investment based on this information. Investors should consider their financial situation, investment objectives and risk tolerance before making any decisions. It is recommended that you consult a qualified financial advisor. JPost.com is not liable for any investment losses incurred through the use of this information. The information provided is for educational purposes only and should not be considered trading or investment advice.

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