Gold is consolidating after rebounding from support near $4,300 and getting rejected around $4,400, as markets fade the Federal Reserve's hawkish reaction and falling oil prices ease inflation concerns. Traders are now watching the UN General Assembly, where Trump is due to meet Gulf leaders and possibly Iran's president to discuss the war with Iran.
Gold has stayed supported since the Federal Reserve's rate decision, as the market walks back its initial hawkish read. The Fed projected a less hawkish path for interest rates than markets had priced in, and Fed Chair Warsh largely repeated points from his Jackson Hole speech.
Falling oil prices ease inflation concerns
A recent drop in oil prices, driven by expectations of a potential de-escalation, has somewhat eased inflation and rate hike concerns. This dynamic matters for gold because lower inflation expectations tend to reduce the case for aggressive Fed tightening, which supports the metal.
Economic data will also matter given how stretched current market positioning is. If upcoming US data starts surprising to the downside, expectations for aggressive rate hikes will likely ease further, giving gold an additional boost.
UN General Assembly meeting is the next catalyst
Market focus now shifts to tomorrow's UN General Assembly, where Trump has called a meeting with Gulf leaders to discuss next steps in the war with Iran. Iran's delegation has also been allowed to attend, raising the prospect of a meeting between Trump and Iranian President Pezeshkian.
A de-escalation would likely send oil prices lower, further easing inflation and rate hike concerns and supporting gold. The Flash US PMIs are due Wednesday, followed by a Trump-Xi meeting on Thursday.
Key levels to watch
On the daily chart, gold rebounded strongly from the 4,300 support before being rejected near 4,400. A pullback to that support could draw buyers positioning for a rally toward 4,510, while a break lower would open the door to a drop toward 3,885.
On the four-hour chart, price is breaking above the downward trendline that had defined the recent bearish structure, with buyers likely to defend the 4,334 swing low to keep pushing toward 4,510. Sellers would need a break below 4,334 to target the major 4,300 support again.
Source: Investinglive
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