On Wednesday (September 18th), the gold market experienced severe fluctuations during the New York session. After the Federal Reserve cut interest rates by 50 basis points, spot gold briefly hit a new historical high. However, Powell's speech caused the gold price to plummet from its high, falling below $2550 per ounce at one point.

The Federal Reserve did indeed initiate a rate cut as expected on Wednesday, announcing a 50 basis point cut. The Federal Reserve also expects the federal funds rate to be around 4.4% by the end of 2024.

Federal Reserve policymakers have decided to reduce borrowing costs as they are increasingly confident that inflation is "sustainably" moving towards the Fed's 2% target. However, they acknowledge that the dual mission of price stability and maximum employment is roughly balanced, while pointing out the uncertain economic outlook.

After the Federal Reserve cut interest rates by 50 basis points, spot gold surged to a record high of $2600.15 per ounce. But after Powell's speech, the price of gold plummeted, dropping as low as $2546.79 per ounce. Powell said at a press conference that don't think a 50 basis point rate cut is the new pace of rate cuts.

As of Wednesday's close, spot gold fell 0.4% for the day, closing at $2559.19 per ounce. On Thursday morning in the Asian market, gold prices were trading around $2557 per ounce.

Bloomberg reported that after the Federal Reserve cut interest rates by 50 basis points on Wednesday, Federal Reserve Chairman Powell hinted that policymakers are not in a hurry to significantly cut interest rates in the future, causing gold prices to fall from historical highs.

New York independent metal trader Tai Wong said, "Gold has soared to a historic high, but bond yields have also risen significantly

Powell said at a press conference, "We have been waiting, and I think this patience has indeed paid off. We believe that inflation will continue to move towards below 2%, so I think that's why we are taking this strong measure today. I don't think anyone should see this and say, 'Oh, this is the new pace.' I think we will cautiously meet time and time again and make decisions during the meetings

Powell also pointed out that if appropriate, the Federal Reserve can accelerate or slow down the pace of interest rate cuts, and even choose to pause rate cuts; The 50 basis point interest rate cut this time does not indicate that we are eager to take action

How to trade gold?

Analyst Christian Borjon Valencia's latest article on Thursday analyzed the technical trend of gold prices.

Valencia pointed out that gold prices fluctuated during the North American trading session on Wednesday. The gold price once hit a historic high of $2600 per ounce. However, buyers failed to overcome this level, which may pave the way for a pullback in gold prices.

Due to the lower target level of the Relative Strength Index (RSI), sellers dominate in the short term.

Valencia stated that if the gold price falls below the September 13th low of $2556 per ounce, the next support level will be $2550 per ounce.

Once the above level is breached, the next target for gold prices will be the August 20th high of $2531 per ounce (currently at support level), followed by the September 6th low of $2485 per ounce.

(Daily chart of spot gold)

Valencia added that from an upward perspective, if gold prices continue to rise, the first resistance level will be $2600 per ounce. Breaking through the latter will target psychological levels of $2650/ounce and $2700/ounce.