Gold Price Rally Faces Uncertain Future Amid Fed Policy Shift
Gold prices have been steadily rising, but traders are now questioning the strength of this rally. Christopher Lewis, an experienced technical analyst and market commentator at DailyForex, notes that gold has recently broken above its 200-day Exponential Moving Average (EMA), a bullish signal in itself. However, Tuesday's price action looks overbought, with gold struggling to hold onto gains created by the recent gap higher.
The reason behind this rally is not solely due to gold itself but rather how traders are reading the Federal Reserve's policy decisions. The market is pricing in the idea that the Fed won't be cutting rates anytime soon, yet expectations are building that further rate hikes could slow down as well. This combination still works in gold's favor, and other metals are starting to follow suit.
A key level to watch is $4,500, with some traders possibly holding back until a clean break above or below this price. According to Lewis, the 50-day EMA is curling higher, closing the distance toward the 200-day EMA, indicating that the shorter-term trend is aligning with the longer-term one.
The main risk to the rally could be a decisive move in interest rates or an easing of inflationary tensions. However, Lewis suggests that the bigger variable may not be the Federal Reserve but rather what happens in the Middle East and how it affects energy flows and bond markets.