Eying $3700: Is Gold’s Historic Rally Sustainable?

The Countdown to the Fed’s Decision

Gold’s recent surge has propelled it to a new all-time high, with prices trading above $3,680 and setting sights on the $3,700 mark. This impressive rally is fueled by a confluence of factors, but its sustainability hinges on one key event: the upcoming Federal Reserve monetary policy decision. Markets are now in a high-stakes waiting game, keenly anticipating the central bank’s next move.

The consensus is clear: a rate cut is imminent. The overwhelming sentiment, as reflected in market probabilities, is for a 25 basis point reduction in the federal funds rate. A more aggressive 50 basis point cut is considered a very low probability, but a surprise of that magnitude would likely send shockwaves through the market. This near-certain expectation of monetary easing is a powerful catalyst for gold, a non-yielding asset that becomes more attractive when interest rates fall. Lower rates also tend to weaken the dollar, making gold cheaper for international buyers and further boosting demand.

While a dovish Fed decision could unlock further upside for gold, with potential targets at $3,750 and even $3,800, the path forward isn’t without risk. A more cautious message from the central bank, or any deviation from the expected rate cut, could trigger a sharp wave of profit-taking. After a significant rally to record highs, traders and investors are highly sensitive to any shift in sentiment.


The current market environment for gold is defined by this delicate balance between strong underlying support and the potential for a sudden reversal. The precious metal’s recent performance is a testament to its safe-haven status, particularly in times of economic uncertainty and shifting monetary policy. As the Fed prepares to announce its decision, the gold market is on a knife’s edge, ready to either confirm its bullish momentum or succumb to a period of consolidation. The next move will be a crucial test of whether gold’s historic rally is built on solid ground or simply a reaction to a widely anticipated event.