Fed Officials Cool Hopes for Rate Cuts.Will Gold Price Rally Toward the $4,000 Threshold?

TradingKey - Since the Federal Reserve announced a 25-basis-point rate cut last week, market sentiment on future easing has turned divergent, with several Fed officials recently tempering expectations for additional cuts. Gold prices have continued to hit new highs and accelerated higher following the Fed’s move, but stalled near $3,800 before pulling back to around $3,750. The overall bullish trend remains intact, and prices may continue climbing along the 5-day moving average, potentially testing the psychological $4,000 level in the coming weeks.

Fed officials have been speaking frequently in recent days, with several casting doubt on the pace of further rate reductions. Alberto Musalem, President of the St. Louis Fed, said he supported last week’s rate cut as an insurance measure against labor market weakness. However, he cautioned that the central bank’s room for additional cuts is limited while inflation remains elevated.

Stephen Miran, the Fed’s newly appointed governor, argued that current interest rates are too high and called for aggressive and rapid rate cuts over the coming months to avoid unnecessary layoffs.

Chicago Fed President Austan Goolsbee said Tuesday that the central bank needs to proceed cautiously on rate cuts amid growing pressures from slowing economic growth and a weakening labor market.

Michelle Bowman, the Fed’s Vice Chair for Supervision, said the central bank may already be behind the curve in supporting the labor market. If demand weakens further and businesses begin cutting jobs, she noted, the Fed may need to accelerate its easing pace.

According to CME Group’s FedWatch Tool, markets now assign a 10.2% probability to the Fed holding rates steady in October and an 89.8% chance of a 25-basis-point cut. For December, the probabilities stand at 1.7% for no change, 23.1% for one cut, and 75.3% for two cumulative cuts (50 basis points).

This Friday, investors will receive the August core PCE price index—the Fed’s most closely watched inflation gauge—which could become the first decisive data point shaping the outlook for rate cuts in the fourth quarter. The market widely expects headline PCE to rise from 2.6% to 2.7%, while core PCE is projected to hold steady at 2.9%. Should the data confirm these expectations, markets are likely to fully price in two more cuts in October and December, potentially fueling another leg up in gold prices. Conversely, if inflation surprises to the upside, expectations for a slower pace of easing could resurface, putting downward pressure on gold. 

Source: Mitrade Gold Price Outlook

Technically, gold prices have posted six consecutive weekly gains, maintaining a clear uptrend. The metal stalled near $3,800 this week but remains within its established rising channel. On the daily chart, key moving averages are aligned upward in a bullish configuration, signaling that upside momentum remains dominant.

The KD indicator shows both lines hovering near 80, indicating overbought conditions. The fast line has turned downward and crossed below the slow line, suggesting short-term bearish pressure is building, which could cap gains in the near term. However, the overall bullish trend remains intact, with potential for another test toward the $4,000 level.

On the upside, initial resistance is seen at $3,850, followed by $4,000, with a more critical barrier at $4,100. On the downside, initial support lies at $3,650, followed by $3,550, with stronger support at $3,400.