On Wednesday, September 17th, the gold market experienced significant volatility. After a period of consolidation during the Asian session, a strong rally pushed prices through the 4320 level, extending gains into a steady climb. The European session saw continued upward momentum, breaking past the Asian high, and the early North American session maintained this trajectory, reaching a peak of $4367 per ounce. However, a sharp sell-off took hold during the night, triggered by the Federal Reserve's decision to raise interest rates, driving spot gold down to a session low of $4234.
In the previous day's analysis, we provided clear trading signals. A breakout above the 4310/20 area during the Asian session was identified as a signal to go long, waiting for a pullback in the afternoon for an optimal entry point. This strategy aimed to capitalize on the breakout of the prior resistance level and extend profits toward the key resistance target of $4355. We also advised that approaching $4355 for the first time ahead of the Fed's rate decision could present a short-term short-selling opportunity.
The anticipated 25 basis point rate hike arrived as expected, causing gold to plummet from the $4366 region to a low of $4234. This move underscored the powerful influence of news events on market direction. However, crucially, the price did not break below the $4234 low to trigger a second wave of selling in the late session. This suggests the news-driven decline was a "one-off" move, following the classic "buy the rumor, sell the fact" pattern. I previously stated that with the rate hike being fully priced in, we should also watch for a potential rebound after the bearish news is fully absorbed. As it stands, the downward momentum from this rate hike speculation appears to have been released, implying limited further downside and suggesting gold may now be gradually constructing a bottom.
Today's outlook points to a rebound following the sharp overnight drop. With the low at $4234 and a secondary higher low at $4256, the plan is to look for support near the $4256 area on any intraday pullback to initiate long positions, taking profits after a 30-50 dollar move higher. Given the magnitude of the recent decline, recapturing all lost ground in a single session is unlikely. Therefore, we expect a secondary pullback demand after the initial rebound. A key resistance level to watch is $4340; if prices rally into this zone again, it could be a candidate for a short-term short position, before shifting back to a primary long strategy on any subsequent dip.
Comments