Gold prices are rebounding on Tuesday, trading in the $2,650s per troy ounce, as safe-haven demand rises following Israel’s ground invasion of Lebanon. This geopolitical tension has shifted investor sentiment toward gold after two days of losses. However, the gains are likely to be limited by recent comments from Federal Reserve Chairman Jerome Powell, who adopted a cautious, data-dependent stance on interest rates.
Powell indicated that while the Fed recently implemented a larger-than-standard 50 basis point cut, this does not guarantee similar cuts in future meetings. He emphasized that the Fed is not in a hurry to reduce rates, suggesting potential for two more 25 basis point cuts by year-end, but not on a fixed timeline. Consequently, market expectations for a significant rate cut in November have dropped from over 60% to the mid-30% range.
From a technical perspective, gold is at risk of reversing its short-term uptrend, with a pullback to the 50-period Simple Moving Average on the 4-hour chart. The formation of lower lows and lower highs since the all-time high on September 26 raises concerns about the trend. A break below $2,625 could trigger further declines toward $2,600 and lower Fibonacci retracement levels.
Despite the current weakness, gold remains in a medium to long-term uptrend, and a break above the all-time high of $2,685 could signal a continuation toward $2,700 and $2,750. The Relative Strength Index (RSI) is in neutral territory, indicating room for further downside before reaching oversold conditions.
