Gold is about to face a stormGold fell continuously but found support around the 3,660 level and began to rebound—just as mentioned yesterday, the 3,658-3,662 range is a top-bottom conversion zone. As long as this level remains unbroken, the bullish trend is not over. However, given the upcoming interest rate decision, we remain bullish but will no longer chase highs, as we need to be cautious of a sudden trend reversal. Remember: the unchanged long-term trend does not mean there will be no corrections amid the uptrend. When most people start celebrating, we must maintain awe for the market. Focus on resistance around 3,685-3,690 and support around 3,658-3,662.
Below are my personal views on the interest rate decision:
It can be said that a rate cut at this meeting is almost a foregone conclusion; the only uncertainty is whether it will be 25 or 50 basis points.
A 25-basis-point rate cut with a hawkish tone (45% probability)
Currently, market expectations for a Fed rate cut are extremely high. The mainstream expectation on Wall Street is three 25-basis-point cuts in September, October, and December, totaling 75 basis points. If the Fed’s statement and Powell’s press conference fail to hint at a further rate cut outlook or implicitly approve a consecutive cut in October, this could well be interpreted as a "hawkish rate cut," and market expectations will tighten afterward. This will be the biggest risk of this meeting—there is potential for a "buy the rumor, sell the fact" move in the short term, pushing the U.S. dollar higher. Conversely, assets like U.S. stocks and gold may face selling pressure due to "bad news after good news," combined with profit-taking and technical overbought conditions.
A 25-basis-point rate cut with neutral-to-dovish wording (45% probability)
Compared with the Fed’s June projections, both the number and magnitude of rate cuts have increased, but Powell maintains ambiguous and neutral wording. This will fully align with current market expectations. In this scenario, the U.S. dollar will likely trade sideways in a lower range in the short term, while assets like U.S. stocks and gold will consolidate in higher ranges. The market will wait for new signals to seek a breakout.
An unexpected 50-basis-point rate cut (10% probability)
This scenario would be like a shot in the arm in the short term. Although most assets (except the weakening U.S. dollar) will benefit temporarily, it may trigger market concerns that the Fed has surrendered to political pressure and lost its independence, as well as deep worries about the U.S. economic situation. At the same time, a sharp U.S. rate cut will drastically narrow the interest rate differential with overseas markets, leading to a tendency for large amounts of U.S. dollar capital to flow out of the U.S. market—this will put short-term pressure on U.S. stocks. Therefore, this scenario may not be a real positive for U.S. stocks. In contrast, gold will benefit as safe-haven demand continues to be boosted.
