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Policy Divergence and Monthly Rebalancing Drive Rebound from Lows
Summary:
Gold has staged a technical rebound after hitting a monthly low, reclaiming the 4600 level. While the Federal Reserve kept rates unchanged, growing internal divisions have increased uncertainty סביב the policy outlook. Coupled with monthly mean reversion and algorithmic trading flows, this has provided short-term support to gold. However, structurally, the current rebound remains a corrective move within a broader downtrend, and a confirmed trend reversal is still pending.
Buy
TradingXAUUSD
EXP
4622.23
Entry Price
5100.00
TP
4470.00
SL
4614.36 -7.75 -0.17%
0
Point
Flat
4470.00
SL
CLOSING
4622.23
Entry Price
5100.00
TP
Fundamentals
During Thursday’s European session, gold extended its rebound from the previous session’s lows, successfully breaking above the 4600 level. The prior dip to a monthly low suggests that the recent recovery is largely driven by technical repair and portfolio rebalancing.
The Federal Reserve held its policy rate unchanged at 3.50%–3.75% at Wednesday’s meeting, in line with expectations. However, the details of the decision highlighted widening divisions within the committee. Governor Milan once again dissented, advocating a 25 basis point rate cut, while Hammack, Kashkari, and Logan opposed introducing any dovish bias into the statement, signaling caution against premature easing.
The policy statement maintained a broadly neutral tone: economic activity was described as “expanding at a moderate pace,” the labor market remains stable though job growth is losing momentum, and inflation is still considered “elevated,” partly due to rising global energy prices.
These divisions underscore the lack of a clear consensus within the Fed regarding the next policy move. On one hand, some members favor preemptive easing to address slowing growth and weakening labor conditions; on the other, policymakers remain reluctant to signal rate cuts while inflation is still above target. For markets, this translates into a continued “data-dependent and wait-and-see” stance rather than an imminent policy pivot.
Against this backdrop, gold’s rebound is not solely driven by fundamentals but also by technical and quantitative factors. When prices deviate significantly from monthly averages or long-term moving averages, mean-reversion strategies and algorithmic trading models tend to trigger counter-trend buying, pushing prices back toward equilibrium and generating short-term upward momentum.
Technical Analysis
Since mid-April, gold has been in a defensive correction phase, retracing nearly 50% of its prior advance. Despite the recent sharp intraday rebound, the broader structure still reflects a corrective move within a downtrend, with no confirmed signal of a trend reversal yet.
On the downside, the key support level to watch is 4554. A decisive break below this level could extend the decline. If the 4500 threshold is clearly breached, further downside toward the 4401 area may open up, potentially leading to a test of the 200-day moving average near 4264.
Trade Setup
Direction: Buy
Entry: 4582
Target: 5100
Stop Loss: 4470
Valid Until: 2026-05-29 23:55
Support: 4584, 4554, 4511
Resistance: 4647, 4665, 4701
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