Fed’s Policy Decision in Focus
Markets are almost certain the Fed will cut rates by 25 basis points on Wednesday. However, speculation of a larger 50 bps move persists, especially as economic data from the United States signals mounting stress in the labor market. Traders are closely watching for the Fed’s forward guidance and updated economic projections, which will set the tone for monetary policy into the year’s end.
Adding to the high-stakes week, the Bank of England, Bank of Japan, and Bank of Canada are also due to announce policy decisions, creating potential waves across global financial markets.
Weak US Data Fuels Rate Cut Bets
Recent American economic reports have strengthened the case for monetary easing. The August Nonfarm Payrolls report showed just 22,000 new jobs—far below forecasts—while the unemployment rate rose to 4.3%, the highest since late 2021. Jobless claims also hit multi-year highs, with previous payroll figures revised downward, painting a weaker picture of employment.
Meanwhile, consumer sentiment slumped to its lowest level since May, according to the University of Michigan survey. Inflation, though still above the Fed’s 2% target, showed signs of stability: headline CPI rose 2.9% year-on-year in August, while core inflation held steady at 3.1%. Producer prices unexpectedly softened, pointing to easing wholesale price pressures.
Analysts believe these trends increase the likelihood that the Fed will prioritize supporting growth and jobs, even as inflation remains sticky.
Safe-Haven Demand Keeps Gold Buoyant
Gold’s resilience comes amid subdued US Treasury yields, a weaker dollar, and ongoing geopolitical risks that continue to boost safe-haven demand. These factors leave gold well-positioned near record highs, with potential for further gains if the Fed adopts a dovish tone.
Some analysts note that Stephen Miran’s possible confirmation to the Federal Reserve Board could tilt the balance toward a bolder rate cut. Should that happen, markets may see increased volatility across currencies, bonds, and commodities.
Technical Outlook: Rangebound but Firm
On technical charts, gold remains trapped in a $3,620–$3,650 range. The 21-period Simple Moving Average at $3,641 provides near-term support, while dips toward $3,626–$3,630 have found buyers. The 50-SMA at $3,613 offers further cushioning against downside pressure.
For bulls, a sustained breakout above the $3,650 ceiling would open the path for a retest of $3,675 and possibly $3,700. Momentum indicators suggest consolidation rather than reversal, with the RSI around 58 and ADX near 31 showing a pause in trend strength.
Global Implications
The upcoming policy week could set the stage for gold’s next big move. If the Fed confirms markets’ expectations and signals more cuts ahead, gold may extend its record rally. But if policymakers strike a more cautious tone, the metal could remain locked in its current consolidation phase.
For Indian investors, gold remains a critical hedge against inflation and currency depreciation. According to the Reserve Bank of India, the country has consistently built its gold reserves as part of its foreign exchange strategy, reinforcing the metal’s importance in global finance.
