Fed Policy Uncertainty Persists as Risk of a High-Level Gold Correction Increases

Summary:

Gold prices have remained strong recently, but as the short-term rally extends, accumulated profit-taking pressure is increasing, along with the risk of a correction. The key drivers of the gold market remain Federal Reserve monetary policy and the outlook for U.S. inflation. If inflation comes in above expectations again, the Fed may maintain higher interest rates for longer, while Treasury yields and the U.S. dollar could gain further support, weakening the bullish case for gold. In the short term, gold still has room to rise, but the risks of chasing the market at elevated levels are increasing. Overall, it may be more prudent to wait for a pullback before looking for new trading opportunities.

SELL XAUUSD

EXP

PENDING

4475.00

Entry Price

4050.00

4580.00

4410.79 -5.43 -0.12%

Pips

PENDING

4050.00

Exit Price

4475.00

Entry Price

4580.00

Fundamental

The biggest uncertainty facing gold prices remains Federal Reserve monetary policy. The core trading narrative behind the current strength in gold has centered on slowing U.S. economic momentum and expectations that the tightening cycle is coming to an end. However, the inflation outlook remains highly uncertain.

If U.S. inflation rebounds above expectations, the Federal Reserve may extend its restrictive policy stance, while Treasury yields and the U.S. dollar could receive further support. At the same time, the opportunity cost of holding gold, a non-yielding asset, would increase. Under such circumstances, the fundamental drivers currently supporting gold could change, leaving the precious metal vulnerable to a significant correction.

Meanwhile, the recent rapid rise in gold prices has accumulated substantial unrealized profits, while the risk of technical overbought conditions is gradually increasing. As a result, the potential for a short-term technical correction cannot be ignored.

From a capital-flow perspective, overseas speculative funds tend to focus more heavily on changes in Fed policy and short-term market expectations. Their relatively fast trading cycles can amplify price movements during trending markets. In contrast, central banks generally accumulate gold based on long-term strategic considerations, typically increasing their holdings steadily and buying on dips. The significant differences in trading logic and holding periods between these two groups of market participants suggest that gold is more likely to experience a cycle of “rally → profit-taking → renewed accumulation” rather than a sustained one-way move.

Therefore, gold is likely to remain in a high-level consolidation phase with its overall price center gradually moving higher in the coming period. Against this backdrop, investors should avoid blindly chasing rallies, carefully assess their own risk tolerance, and view gold price fluctuations from a medium- to long-term asset allocation perspective.

Fed Policy Uncertainty Persists as Risk of a High-Level Gold Correction Increases_1

Technical

As market expectations for further monetary tightening by the Federal Reserve in September have weakened, the U.S. dollar has remained under selling pressure, providing support for gold. Gold prices continued to edge higher on Monday.

From a technical perspective, the MACD remains in positive territory, indicating that buyers continue to maintain control of the market. However, the indicator has not yet entered an extreme overbought zone, suggesting that gold still has some room for further short-term gains.

Nevertheless, as prices continue to rise and profit-taking positions accumulate, the upside potential and downside correction risk are gradually becoming asymmetric. From both fundamental and technical perspectives, the medium-term bullish structure in gold remains intact, but the risks associated with chasing the market at elevated levels are increasing. Therefore, while gold may still extend its rally, from a risk-reward perspective, waiting for a pullback to establish long positions—or looking for short opportunities following a reversal at elevated levels—may offer a more attractive trading approach at present.

Trading Recommendation

Direction: Sell

Entry: 4475

Target: 4050

Stop Loss: 4580

Strategy Valid Until: September 16, 2026, 23:55

Support: 4356, 4339, 4310

Resistance: 4417, 4450, 4476

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