Gold Pauses After Hitting New Highs Ahead of Fed Decision

Commodity

Summary:

Gold (XAU/USD) corrects slightly lower after hitting a fresh all-time high of $3,045 as geopolitical tensions and Federal Reserve rate expectations drive sentiment.

BUY XAUUSD

Close Time

CLOSED

3029.95

Entry Price

3080.00

2980.00

4340.89 +41.50 +0.97%

120.8

Pips

Profit

2980.00

3042.03

Exit Price

3029.95

Entry Price

3080.00

Gold prices pulled back slightly on Wednesday, with XAU/USD trading near $3,030 after reaching a new record high of $3,045 earlier in the session. The recent rally in the precious metal was driven by escalating geopolitical tensions, particularly in Turkey, where Istanbul Mayor Ekrem Imamoglu—President Tayyip Erdogan’s key political rival—was detained on charges of corruption and alleged ties to terrorist organizations. The unexpected development has heightened political instability in the country, fueling concerns about broader unrest and strengthening the demand for gold as a safe-haven asset.

The bullish momentum in gold was further supported by the latest developments in the ongoing Ukraine war. A high-profile phone call between US President Donald Trump and Russian President Vladimir Putin on Tuesday did not yield a breakthrough on a ceasefire agreement. However, both leaders agreed to an immediate 30-day halt on strikes targeting energy infrastructure—a limited but notable development that has provided some temporary relief in global energy markets.

Despite this, Ukrainian President Volodymyr Zelenskyy dismissed the discussions as ineffective, stating that "talks about Ukraine without Ukraine will not bring about results." His remarks suggest that tensions in the region remain high, which could keep gold prices elevated as investors seek protection against geopolitical risks.

The focus now shifts to the Federal Reserve’s policy decision later on Wednesday, where traders will assess how the central bank plans to navigate interest rate expectations amid rising inflation concerns and growing uncertainty surrounding Trump’s economic policies. The Federal Open Market Committee (FOMC) is widely expected to keep interest rates steady at 4.25%-4.50%, marking another meeting in which policymakers opt for a cautious approach.

According to the CME FedWatch tool, there is a 99% probability that the Fed will maintain its current stance, while the likelihood of a rate cut in June stands at 64.8%. However, the key market-moving event will be the release of the Fed’s updated Summary of Economic Projections, which could provide further insight into policymakers' outlook on inflation, growth, and interest rate cuts heading into 2025.

Fed Chair Jerome Powell’s press conference will be closely scrutinized, particularly regarding whether the central bank will maintain a dovish stance or shift toward a more data-dependent approach. With the Trump administration pursuing aggressive protectionist policies—such as reciprocal tariffs that could potentially stoke inflation—investors are keen to gauge the Fed’s response to potential economic headwinds.

Gold’s near-term direction will largely depend on whether the Fed signals a more hawkish outlook. A delay in rate cuts or a more cautious approach to monetary easing could weigh on gold prices, as higher yields reduce the appeal of non-yielding assets like bullion. On the flip side, if Powell hints at a more accommodative policy in response to weakening economic data, gold could regain its upward momentum and potentially push beyond its recent record high.

While rate expectations play a key role in gold’s trajectory, broader market sentiment is also undergoing a significant shift. Investors are growing increasingly wary of economic risks stemming from Trump’s trade policies, leading to a sharp decline in US equity exposure. Bank of America’s latest fund manager survey revealed that investors have been slashing their holdings of US stocks at the fastest pace on record, highlighting the scale of risk aversion sweeping through financial markets.

In this environment, gold remains an attractive hedge against uncertainty, with its safe-haven appeal further reinforced by geopolitical turmoil. The ongoing situation in Turkey, coupled with the fragile nature of the Russia-Ukraine ceasefire, continues to provide strong fundamental support for bullion. If tensions escalate further or if market sentiment deteriorates following the Fed’s decision, gold could quickly resume its upward trajectory.

Technical Analysis

From a technical perspective, gold remains in a strong bullish trend, though some consolidation is evident after the recent rally. XAU/USD has encountered resistance near $3,038.80, which aligns with previous weekly highs. This level could act as a short-term barrier, potentially triggering some profit-taking before the next leg higher.

However, if gold manages to break decisively above this resistance zone, the next major target lies at $3,052.80—considered the ultimate top for the current bullish fractal. This psychological benchmark could serve as a magnet for price action, especially if geopolitical tensions remain elevated or if the Fed adopts a dovish tone.

On the downside, support is seen near the $3,020-$3,025 region, where buyers have previously stepped in to defend the uptrend. A break below this zone could expose the metal to deeper corrections, particularly if the Fed surprises markets with a more hawkish stance.

The hourly chart shows a notable bearish engulfing candle, indicating that some short-term selling pressure has emerged. However, the overall bullish bias remains intact as long as gold holds above key support levels. Additionally, the 32% Fibonacci retracement level suggests that any pullback is likely to be shallow, providing traders with potential buying opportunities on dips.

TRADE RECOMMENDATION

BUY GOLD

ENTRY PRICE: 3030

STOP LOSS: 2980

TAKE PROFIT: 3080

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Gold Pauses After Hitting New Highs Ahead of Fed Decision

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