Gold Prices Plunge on Fed’s Hawkish Prospect

• The dollar is strong ahead of the FOMC meeting minutes on the Hawkish prospect.

• Gold Plummet as the market eyes on a stronger dollar ahead.

Market Summary

Meanwhile, U.S. markets were lifted by a tech rally, with Nvidia surging more than 4% in yesterday‘s session. However, global equities face uncertainty amid escalating tensions in the Middle East and the Federal Reserve’s hawkish stance.

In the forex market, the dollar remains strong, with the Dollar Index hovering above the 102.00 mark. Strong U.S. jobs data and hawkish comments from Fed officials advocating caution on rate cuts have bolstered the greenback. Dollar traders are eyeing today's FOMC meeting minutes and tomorrows U.S. CPI report for further direction.

In contrast, the Reserve Bank of New Zealand cut interest rates by 50 basis points, in line with market expectations, putting additional downside pressure on the Kiwi.

In commodities, gold faced heavy selling pressure, dropping to a two-week low. The prospect of a more hawkish Fed, which favours a stronger dollar, is weighing on gold prices. Oil prices also took a hit, driven by an unexpected 10.9 million-barrel build in U.S. crude inventories.

Current rate hike bets on 7th November Fed interest rate decision:

Source: CME Fedwatch Tool

-50 bps (7%) VS -25 bps (93%)

Market Movements

DOLLAR_INDX, H4

The Dollar Index is holding near a strong resistance level as investors reassess the likelihood of further U.S. interest rate cuts. With recent U.S. data showing better-than-expected performance, expectations for aggressive rate cuts have diminished. Investors are now pricing an 87% chance of a 25-basis-point reduction at the Fed‘s upcoming November meeting, and some are even betting on no cut at all. This week, key data releases, including the U.S. CPI report and the Fed’s September meeting minutes, are likely to influence market sentiment.

The Dollar Index is trading higher while currently testing the resistance level. However, MACD has illustrated increasing bearish momentum, while RSI is at 67, suggesting the index might enter overbought territory.

Resistance level: 102.55, 103.30

Support level: 101.80, 100.95

XAU/USD, H4

Gold prices (XAU/USD) have fallen for five consecutive days, reaching over a one-week low, breaking below 2630 support level. A strong U.S. labor market, as evidenced by last Friday‘s upbeat Nonfarm Payrolls report, has led investors to scale back expectations for oversized rate cuts by the Fed. Additionally, a technical breakdown below a consolidation zone has accelerated the bearish momentum for gold. Investors will be closely monitoring the U.S. CPI, PPI reports, and the Fed’s upcoming meeting minutes for further clues on golds movement.

Gold prices are trading lower following the prior breakout below the previous support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 39, suggesting the commodity might experience technical correction since the RSI rebounded sharply from oversold territory.

Resistance level: 2630.00, 2640.00

Support level: 2605.00, 2590.00

GBP/USD，H4

The Pound Sterling remained range-bound against the dollar after experiencing a sharp decline at the start of the month. The dollar maintained its strength as Federal Reserve officials continued to signal a hawkish stance ahead of the FOMC meeting minutes release today and the U.S. CPI report tomorrow. Should the minutes reinforce a hawkish outlook, it could further boost the dollar, potentially driving the GBP/USD pair lower.

GBP/USD has eased from its bearish momentum and has been consolidating for the past few sessions, suggesting a potential technical rebound for the pair. The RSI has gotten out from the oversold zone, while the MACD has a golden cross at the bottom, suggesting the bearish momentum has eased.

Resistance level: 1.3140, 1.3220

Support level: 1.3065, 1.2940