The gold market fell early on Wednesday, as the market is waiting to hear from the FOMC later.
Gold
The gold market has fallen a bit during the early hours here on Wednesday to break below the crucial $5,000 level and then the 50-day EMA. That being said, it is a very negative turn of events, and it does suggest that perhaps we could continue dropping.
I would also point out that we are in a situation where the gold market is awaiting the Federal Reserve, so this could turn around just as quickly. The US dollar has been rallying and that is probably the main reason for what we are seeing here. If we continue to drop from here though, I think the $4,800 level as well as the $4,600 level could offer support.
Federal Reserve Anticipation
I have no interest in shorting gold, at least not yet, but if we broke down below the $4,600 level I would have to consider it. We did just form a major double top in theory, but if we can hold above the $4,600 level then it really does not matter. It could turn into an ascending triangle before it is all said and done. You just don't know.
This is a market that is waiting for the Federal Reserve interest rate decision, and I think that is basically what is going on here. People are a little bit concerned because the Federal Reserve might be a bit more hawkish than originally thought and that has been the case for about 1.5 years now.
We have played this same game where traders are trying to bet that the Fed is going to start cutting rates and then they don't. Once they started a while ago, it was much slower than people anticipated. Now they are pricing in a 25-basis rate cut in December. In other words, inflation is too sticky.
If that is going to be the case, the US dollar could continue to be a difficult barrier for the gold market. Regardless, central banks around the world continue to buy it and obviously we have a lot of geopolitical concern, so it is not as if there is no reason for gold to go higher. It is just that at this point in time with the Fed meeting, there is probably a lot of people jumping out of the market for the time being.