Gold Price Forecast: $3,700 Fed Pivot in Focus as Fed Cut Looms

Jasper Osita - Market Analyst

2025-09-16 13:19:14

Gold eyes $3,700 breakout as traders position for a Fed rate cut with dovish guidance.
$3,665–$3,675 H4 Fair Value Gap holds as key demand ahead of the decision.
Fed tone is the pivot - dovish keeps momentum to $3,740+, hawkish risks a flush back to $3,615.

Gold Sustains Momentum into the Fed

Gold extended higher into record territory at the start of the week, powered by a softer dollar, easier yields, and consensus expectations that the FOMC will deliver a 25 bp cut. Spot gold tapped ~$3,685–$3,689/oz while ETF positioning (SPDR) edged up - signals that dip buyers remain active into the decision. Traders now care less about if the Fed cuts and much more about how dovish the dots and press conference sound. A “not-dovish-enough” message after such a run could spark a shakeout; a “credible easing path” keeps the uptrend intact.

Inflation mixed, labor softer, cut odds firm: August CPI surprised to the upside on headline (0.4% m/m; 2.9% y/y) while core held at 0.3% m/m; 3.1% y/y - still sticky, yet markets continue to emphasize labor-market cooling and growth risks. Into the meeting, Fed funds futures imply overwhelming odds of easing, with debate only on the size (25 vs 50 bp) and the follow-through path into year-end.

Fed Rate Cut Expectations and Gold’s Sensitivity

Markets are entering the Fed week with conviction that a 25 bp rate cut is almost guaranteed, with some debate lingering around the possibility of a larger 50 bp move. For gold, what matters isn’t just the cut itself, but the forward path of policy.

A 25 bp cut with dovish stance - signaling more easing into year-end - would likely reinforce gold’s upside momentum. Lower rates compress real yields, weaken the dollar, and reduce the opportunity cost of holding non-yielding assets like bullion.
A 25 bp cut with hawkish lean - for example, if the Fed’s “dot plot” implies only one cut this year - could temper gold’s rally, triggering a “sell-the-news” retracement as investors recalibrate.
A surprise 50 bp cut - while not the base case - would almost certainly unleash a strong rally in gold, given its signal of urgency from the Fed.

This dynamic underscores why traders view gold as one of the most policy-sensitive assets: the metal’s fortunes swing sharply on shifts in real yield expectations and the dollar index. As long as the Fed’s bias tilts toward accommodation, gold is likely to remain in demand as both an inflation hedge and a safe-haven alternative to U.S. fixed income.

Fed Rate Cut Expectations and Gold’s Sensitivity

Markets are entering the Fed week with conviction that a 25 bp rate cut is almost guaranteed, 96**%**, with some chatter around the possibility of a larger 50 bp move. For gold, what matters isn’t just the cut itself, but the forward path of policy.

A 25 bp cut with dovish guidance - signaling more easing into year-end - would likely be the catalyst for a clean breakout above $3,700. This would validate the bullish continuation scenario, unlocking upside toward $3,715–$3,725 and even $3,740.
A 25 bp cut with hawkish lean - if the Fed’s dot plot signals only one additional cut - could stall momentum at $3,700, leading to a sell-the-news dip back into the reclaimed H4 FVG ($3,670–$3,675). A deeper fade could test $3,645 or $3,615 if sellers press the retracement.
A surprise 50 bp cut - though not the base case - would likely trigger an aggressive surge through $3,700, with price chasing liquidity into $3,740–$3,780 as real yields collapse and the dollar weakens further.

In short, the $3,700 level has become the Fed-dependent pivot:

Dovish = breakout continuation
Hawkish = rejection + retest of demand zones

This alignment between macro policy expectations and technical structure highlights why gold is one of the most policy-sensitive assets. As long as the Fed leans accommodative, bullion remains supported as both an inflation hedge and a safe-haven allocation against U.S. dollar weakness.

Technical Outlook (XAU/USD)

Narrative: Gold has broken out of consolidation and reclaimed the H4 Fair Value Gap at $3,665–$3,675, with price consolidating just below the key $3,700 liquidity pivot. This level is now the battleground ahead of the Fed decision - dovish stance could fuel continuation higher, while hawkish tones risk a deeper flush back into demand.

Bullish Scenario: Breakout & Fed-Driven Continuation

A dovish Fed stance (25 bp cut + guidance for further easing) could be the trigger for a clean breakout above $3,700.
Acceptance above $3,700 sets up targets at $3,715–$3,725, with stretch potential toward $3,740–$3,780.
Pullbacks into the $3,670–$3,675 H4 FVG that hold firm will likely invite fresh dip-buying flows.

Bullish Trigger: Dovish Fed communication or market confirmation above $3,700.

Bearish Scenario: Sell-the-News Flush

If the Fed cuts but signals a shallow easing path (hawkish-leaning dots), gold could fail to hold above $3,700 and break back through the $3,670–$3,675 FVG.
A decisive rejection would expose $3,645 (liquidity pocket) and potentially $3,615–$3,620.
A sustained move below $3,615 risks distribution and deeper retracement toward $3,580.

Bearish Trigger: Hawkish Fed messaging or failure to defend $3,670 FVG.

In summary, the $3,700 level is the Fed pivot:

Dovish = Breakout continuation
Hawkish = Rejection and liquidity sweep lower

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Autorul

Jasper has been in the markets since 2019 trading currencies, indices and commodities like Gold. His approach in the market is heavily accompanied by technical analysis and of course, supported by fundamentals. He has a background in trading proprietary firms and has been teaching students how to navigate themselves in the markets from basic to advance concepts.

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