Gold jumped higher in trading last week to fresh record highs but the latest leg is falling just shy of the $2,600 mark. Buyers are still in control but it looks like we might have to wait until the Fed tomorrow before deciding on where to go from here. As traders step up bets for a 50 bps rate cut since last week, we have seen yields fall. And that has helped prop up gold prices in turn.
But so far this week, we are seeing price action stall a fair bit and enter into a slight consolidation phase.
It wouldn't be too surprising to see some profit-taking ahead of the Fed tomorrow. But what comes after, will depend on the Fed's decision as well as how Powell chooses to communicate the central bank's next steps.
2-year Treasury yields are already on the brink and market players are just searching for some vindication.
The long-term outlook for gold remains bright. However, a key trigger for selling/profit-taking at this stage could well result in a rather violent correction. That considering gold has yet to experience any significant retracement throughout the course of this year.
For now, the next step will come down to the Fed as that will also see broader markets be impacted. That especially the dollar and yields, which will also drive gold sentiment.
