GOLD: Tuesday’s Retracement,Market Remains Optimistic

Gold experienced a decline following the retracement observed on Tuesday but opened Wednesday on a positive note. Today, members of the Federal Reserve (Fed) issued warnings that the US central bank requires much more compelling evidence that inflation is easing before it can begin cutting interest rates. This caution from the Fed underscores the likelihood that interest rates will remain elevated for an extended period, which could potentially boost the Greenback and exert downward pressure on USD-denominated gold.

Despite this, the downside for gold may be mitigated by several factors. Renewed trade tensions between the US and China, ongoing geopolitical tensions in the Middle East, and robust demand from central banks and Asian buyers are likely to provide substantial support for the yellow metal. These elements could limit the extent of any decline, keeping gold relatively buoyant despite the adverse impact of a stronger US dollar.

Later on Wednesday, gold traders will be closely monitoring the release of the FOMC minutes and a speech by Fed member Goolsbee. These events are expected to offer further insights into the Fed's economic outlook and monetary policy stance, which could influence gold prices.

From a technical analysis perspective, the price of gold continues to reside in a zone that suggests a potential bullish impulse. This follows a false breakdown, which we have identified as a Wyckoff spring pattern—a classic signal in technical analysis indicating a possible upward reversal. The price has retested the local 50% retracement area, and from our point of view, this sets the stage for a possible upward movement towards the upper boundary of the current accumulation area. This technical setup, combined with the fundamental factors at play, indicates that gold may have room to grow despite current market pressures.