Gold prices face a downturn before the Fed's interest rate decision

The global gold market is going through stressful trading sessions as all eyes are on the upcoming interest rate decision of the US Federal Reserve (Fed) on October 12.

After many consecutive months of increase, gold prices are currently fluctuating around 4,240 USD/ounce - a level that is considered sensitive both psychologically and technically. In that context, international analysts have given mixed reviews about the precious metal's short-term outlook, reflecting the strong tug-of-war between expectations of monetary easing and correction risks.

Mr. Adrian Day - Chairman of Adrian Day Asset Management Company - said he will remain cautious until the Fed meeting takes place. According to him, the possibility of the Fed cutting interest rates in the next session is very high, however, this factor has almost been reflected by the market in the current gold price. The risk here is possible disappointment, which could lead to a correction in the short term. Therefore, I maintain the viewpoint unchanged" - Mr. Day emphasized.

This assessment shows that concerns about the scenario of "buying according to expectations, selling when official information is announced" are still covering the market.

On the other hand, Mr. Marc Chandler - CEO of Bannockburn Global Forex was more optimistic when he said that the current accumulation period of gold prices is "building". According to him, gold's sideways move in recent times is necessary to strengthen the increase.

If it breaks above the $4,265/ounce spot price mark, the market could well see a historic re-evaluation of nearly $4,380, Chandler said.

Analyzing more deeply the context of global monetary policy, Mr. Chandler said that gold prices have increased sharply after the Fed cut interest rates on September 17, but entered the accumulation phase after the cut at the end of October. There is almost no doubt that the Fed will continue to cut interest rates on December 10, he said.

Meanwhile, many other major central banks such as the Swiss National Bank (SNB), the Reserve Bank of Australia (RBA) and the Bank of Canada are likely to keep interest rates unchanged. Notably, China is about to release foreign exchange reserve data, and analysts believe that the central bank of this country is continuing to buy gold - a factor that can continue to support gold prices in the medium term.

In contrast to the above optimism, Mr. Alex Kuptsikevich - senior market analyst at FxPro predicted that gold prices could fall next week when the USD is likely to recover after the Fed's decision. According to him, silver prices have peaked three times in just the past seven days, while gold is trading around $4,240/ounce - a level that lasted only three days in October.

Notably, November was the fifth consecutive month that the precious metal closed in green, showing that the uptrend had been prolonged and there was a potential risk of technical adjustment.

However, Kuptsikevich also stressed that geopolitical risks have not disappeared. The Russia-Ukraine conflict continues to stand at a standstill, while in the US, the market is watching the upcoming Supreme Court ruling on thuetical cancellation, along with the risk of the federal government falling into a state of closure again. These factors are making investors continue to hold gold as a safe haven, he said.

Notably, political pressure on the Fed is also a constant that cannot be ignored. "If Kevin Hassett becomes the head of the central bank and the number of "puppet" members in the FOMC increases, the risk of accelerating inflation will appear. In such an environment, gold will still be a popular asset, Mr. Kuptsikevich analyzed.

However, he warned that there is a high possibility that after the third interest rate cut, the USD will rebound, leading to a sell-off of gold if the market reacts in a "sell-by-next" manner.

In that turbulent picture, there are still opinions that believe in the positive script. Mr. Michael Moor - founder of Moor Analytics said that gold prices will continue to increase next week, further reinforcing the view that the medium-term uptrend of the precious metal has not ended. The strong differentiation in forecasts shows that the market is really facing an important turn.