Fed Rate Cut Bets Heat Up as Gold Eyes $4,500 Threshold

TradingKey - Fed officials continued to strike a dovish tone, fueling market expectations for further rate cuts, as the central bank’s latest Beige Book also supported additional easing. With the U.S. government shutdown persisting and U.S.-China trade tensions escalating anew, safe-haven assets attracted strong investor demand. Gold prices extended their rally, breaking above the $4,200 threshold, with the overall uptrend remaining firmly intact. The metal may continue its ascent in the near term, potentially testing the $4,500 level.

Fed Governor Michelle Bowman signaled a firm commitment to further easing, stating Tuesday she still expects the Fed to cut rates at both of its final policy meetings this year.

Mary Daly, President of the San Francisco Fed, called for additional rate cuts this year, citing growing concerns about labor market weakness. “With inflation risks somewhat contained but downside risks to employment mounting, further modest policy normalization this year would be appropriate to support the labor market,” Daly said.

Chair Jerome Powell further boosted rate-cut bets, saying, “Based on the data we have, it’s fair to say the outlook hasn’t changed much since the September meeting. The labor market continues to weaken, and while the government shutdown complicates the economic picture, the possibility of a rate cut this month remains on the table.”

The Fed’s latest report indicated that economic activity was little changed over the past month, with widespread reports of softening labor demand across regions and industries. The Federal Open Market Committee will assess the broader economic landscape—including inflation and employment data—to determine whether rate adjustments are warranted. Weak incoming data could reignite market speculation of further easing.

The U.S. government shutdown is now entering its third week, with disruptions spreading across the country. Meanwhile, renewed U.S.-China trade tensions are roiling global markets. Although the reaction has been less severe than in April, risk-off sentiment is rising, driving capital into traditional safe havens like gold.

Source: Mitrade Gold Price Outlook

Technically, gold prices have now posted nine consecutive weekly gains, with the bullish trend clearly intact. Momentum strengthened this week as the metal broke above the $4,200 mark, setting new record highs. On the daily chart, key moving averages remain aligned upward in a solid bullish configuration, signaling that upside momentum is firmly in control.

The KD indicator shows both lines hovering near 80, indicating overbought conditions. However, the lines are moving sideways rather than turning down, suggesting short-term bullish pressure remains strong and could continue to lift prices. The path of least resistance points higher, with potential for a test toward the $4,500 level.

On the upside, initial resistance is seen at $4,500, followed by $4,700, with a more critical barrier at $5,000. On the downside, initial support lies at $4,000, followed by $3,800, with stronger support at $3,500.