The US Federal Reserve recently cut interest rates by 25 basis points, as expected, and indicated the possibility of further cuts. In response, market expectations for the terminal Fed funds rate have shifted significantly over the past month, moving from around 3% to a range of 3.75-4%. This notable shift reflects a growing belief among traders that Trump's "America First" policies could help buffer the economy against a sharper slowdown and potentially fuel inflation.
While more clarity on the new administration's policies will unfold in the coming weeks, the effect on commodities like gold and silver has already been visible. Both metals initially rebounded, but gold encountered a key support-turned-resistance trendline at $2,720, establishing it as a critical resistance point. This "role reversal" suggests potential for further downside in gold, although price signals from the US Dollar Index and long-term bond yields indicate there may still be room for a downward correction in both.
It remains to be seen whether this will lend support to gold. However, based on current price action, further declines seem likely as long as gold remains below $2,720. Key support levels to monitor are $2,600 and a deeper level around $2,530. If prices break back above $2,720, however, it would warrant a re-evaluation of this bearish outlook.
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