On Wednesday, gold prices experienced a volatile session, initially dipping to a one-week low before staging a sharp rebound, driven by shifting expectations from the Federal Reserve. The precious metal found support after the Fed's policy decision, which signaled a pause in its tightening cycle.

Key price levels to watch

Analysts noted that gold had been under pressure due to a strengthening US dollar, which hit a one-month high on expectations of further rate hikes. However, the Fed's decision to maintain rates (the fifth hold this year) triggered a short-term rally, pushing gold to a intraday high of $4,116. Following the announcement, Fed Chair Powell emphasized a firm commitment to the 2% inflation target and distanced the decision from the term "pause," while a 3-2 vote favored a 25-basis-point hike, compared to the unanimous hold in June. This caused gold to pull back from its peak but later stabilize around $4,077.

Technical outlook and support levels

The bounce from a one-week low keeps gold within its recent one-month range. On the downside, support is seen at the daily Bollinger Band middle line near $4,070, followed by the $4,040 area, which provided a base after the initial post-Fed pullback. On the upside, resistance is at the Wednesday high of $4,116, which also marks Monday's peak, with a break above potentially targeting the daily upper Bollinger Band near $4,170. The 5-day moving average is forming a bullish crossover, while the MACD indicator is trending higher. The KDJ and RSI indicators are also forming fresh bullish crossovers, suggesting near-term technical momentum favors further upside.

Trading implications

Gold is currently receiving support from the Fed's dovish stance, which has cooled expectations for a September rate hike and pressured the dollar to a one-week low. A range-bound strategy is recommended, with key support levels at $4,070 and $4,040, and resistance at $4,116 and $4,170.