Gold (XAUUSD) Price Forecast: Can Gold Hold Its Rally Before the Fed?

Gold Rallies as Shorts Fail to Break It

Gold hit a two-week high Wednesday with everything working against it. Crude is surging, September rate-hike odds are climbing, Treasury yields are higher and the dollar is still firm. Bears had that entire setup and could not force a sustained break. Secretary of State Rubio said Iran is not serious about talks after the eleventh straight round of U.S. strikes and crude ran on the headline. That should have been the catalyst to crack gold and it wasn’t. Late shorts got trapped and the covering pushed gold to its highest level in two weeks heading into next week’s FOMC meeting.

At 15:15 GMT, Spot Gold is trading $4156.91, up $79.59 or +1.95%.

Oil Ran and Gold Didn’t Break

Brent above $95 intraday, WTI above $87, tankers reversing course in the Red Sea after the Houthi blockade threat and Rubio closing the door on near-term diplomacy. That was the sellers’ best shot this week and the market absorbed it. The shorts who leaned into the oil surge expecting gold to fold are the ones buying Wednesday afternoon.

The rally does not have a clean fundamental driver behind it. Yields are not falling, the dollar is not collapsing and the Fed has not changed its tone. This is a positioning reset after the downside ran out of momentum and that limits how far it goes without something new underneath. The conflict that is putting a floor under gold is the same conflict lifting oil and that tension has not resolved.

The dollar dipped Wednesday but only after holding support earlier in the week. That is not a tailwind for gold. The January record high came apart as crude lifted the inflation outlook and rate cuts got pulled from the forecast one by one. The same trade is back and running hotter now with Hormuz under pressure and Saudi tankers rerouting. The war is keeping dip buyers interested but that bid alone has not been strong enough to push gold through resistance cleanly.

FOMC Next Week Is the Real Test

A Reuters poll showed economists expect the Fed to hold rates steady through 2026 but futures traders are pricing two hikes by the end of March next year and crude is the reason that gap keeps widening. Next week’s meeting does not have to deliver a hike to put pressure back on gold. The statement and Warsh’s tone on energy and inflation will tell traders whether the covering rally has room to extend or whether the same forces that drove the selling are about to reassert.

No major U.S. economic data lands before Friday’s flash PMI reports. Gold is trading oil headlines and Middle East developments until then. The July and August inflation numbers come after the FOMC meeting and if the crude surge is showing up in the broader price data, the hike conversation gets louder and this rally runs out of room fast.

Spot Gold (XAUUSD) Technical Analysis

Spot gold is edging higher on Wednesday after crossing to the strong side of a short-term retracement zone at $4072.40 to $4041.65. This area is new support.

The best support remains the secondary higher bottom at $3959.80 and the main bottom at $3942.10. The long-term support is $3886.40.

Despite the near-term strength, traders are still facing headwinds at the intermediate retracement zone at $4162.36 to $4214.34. Inside this zone is the main top at $4202.71. The 50-day moving average at $4253.55 is the last potential resistance.

This rally is a little different than recent attempts in that buyers seem to willing to take out offers rather than just sit back and sit on bids. This suggests more professional buying may be taking place rather than just the typical retail crowd.

In my opinion, the steady downtrend and the periodic buying of dips was likely a pattern created by professionals, who wanted the retail crowd to feed the bear by chasing every turn in the market. This current set-up appears to be more promising because of the double-bottom formation. If it gets confirmed then technical traders could return. And if the 50-day moving average is recovered, we may even see some institutional interest.

What to Watch

Gold rallied because the bears could not finish the job, not because the fundamental picture improved. Crude is still running and the rate-hike trade has not backed off. A ceasefire that pulls the bid out of oil and takes pressure off the inflation outlook would give this rally something real to build on. Without one, the covering runs its course and the same headwinds are waiting on the other side.

The market crossed above short-term resistance and is using the retracement zone as new support. The next cluster above is where the main top and the 50-day average will test the double-bottom formation. Professional buying is showing up in the way offers are being taken rather than bids being defended. If the formation confirms and the 50-day is recovered, the conversation changes.

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