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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

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

The Federal Reserve is anticipated to reduce interest rates by 25 basis points at least twice this year, with any further decrease likely to attract buyers back into the gold market.

Source: Adobe images

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

Source: Eikon

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

Source: TradingView

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

Source: TradingView
  • This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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