Gold's Dilemma: Is It Time to Exit the Sideways Trade Before Powell's Pivot?

Gold has spent much of 2025 in a tight, sideways trading range, oscillating between $2,400 and $2,490 per ounce. This consolidation follows a record-breaking rally to $2,490 in early 2025, driven by a combination of geopolitical tensions, central bank demand, and expectations of Federal Reserve rate cuts. Now, as the market braces for Fed Chair Jerome Powell's pivotal Jackson Hole speech in late August, investors face a critical question: Should they exit the current sideways trade ahead of potential policy shifts, or hold for a breakout?

Technical Setup: A Ticking Clock for Breakouts

Gold's technical profile suggests a high-probability scenario for a breakout, but timing remains the key challenge. The metal has been trading within a well-defined ascending channel since late 2023, with the 200-day moving average ($2,230) acting as a critical long-term support level. Short-term support at $2,400 and $2,340 has held firm, while resistance at $2,490—its all-time high—has repeatedly tested buyers.

The Relative Strength Index (RSI) currently sits at 62, indicating bullish momentum without overbought conditions. This suggests that gold's upward bias remains intact, but traders must watch for a potential overbought signal above 70, which could trigger a pullback. Meanwhile, the MACD is in a bullish phase, with the histogram expanding and the signal line crossing above the zero level. A positive divergence in the MACD—where price makes a lower low but the indicator does not—would further confirm the strength of the uptrend.

Chart patterns also point to a breakout scenario. A double bottom formed in May at $2,400 provided a springboard for the recent rally, while an ascending triangle (March–June) reinforced the bullish case. Traders are advised to monitor volume during breakouts: Strong volume at $2,490 would validate the move, while weak volume could signal a false breakout.

Macro Risks: Powell's Pivot and the Fed's Dilemma

The Federal Reserve's policy trajectory is the most significant macro risk for gold. With inflation still above the 2% target (3.1% as of July 2025) and the labor market showing signs of fragility, the Fed faces a classic policy dilemma. Markets currently price in an 85% probability of a 25-basis-point rate cut in September, but Powell's Jackson Hole speech could alter this expectation.

A dovish pivot—confirming the rate cut and signaling further easing—would likely boost gold by reducing real interest rates and weakening the U.S. dollar. Conversely, a hawkish stance (delaying cuts or tightening policy) could push real rates higher, increasing the opportunity cost of holding gold and capping its upside. The Fed's balance sheet, currently shrinking via quantitative tightening, also plays a role: A pivot to quantitative easing would inject liquidity into markets, historically benefiting gold.

Political pressures add another layer of uncertainty. President Trump's criticism of the Fed and his inflationary tariff policies have created a backdrop of policy ambiguity. If the Fed is perceived as yielding to political pressure, it could undermine its credibility and prolong inflation, further supporting gold's case as a hedge.

Strategic Considerations: Balancing Technical and Macro Signals

For investors, the challenge lies in reconciling gold's strong technical setup with the uncertainty of Fed policy. Here's how to approach the dilemma:

1. Key Levels to Watch:
2. Breakout Confirmation: A daily close above $2,490 would validate the bullish case, with $2,530 and $2,600 as next targets.

3. Stop-Loss Placement: Traders should consider exiting long positions if gold falls below $2,400, as this could signal a breakdown in the ascending channel.

4. Positioning for Powell's Speech:

5. Pre-Speech Strategy: Reduce exposure to gold if the Fed's communication hints at a delay in rate cuts.

6. Post-Speech Adjustments: Re-enter long positions if Powell confirms a dovish pivot, using the $2,400 support level as a potential entry point.

7. Diversification and Hedging:

8. Pair gold with inflation-linked assets like Treasury Inflation-Protected Securities (TIPS) to balance risk.
9. Use options strategies (e.g., bull call spreads) to capitalize on potential volatility around the Jackson Hole event.

Conclusion: Exit or Hold?

Gold's technical indicators suggest a strong case for a breakout, but the Fed's policy uncertainty introduces a wildcard. If Powell's speech confirms a dovish pivot, gold could surge toward $2,600. However, a hawkish stance or delayed rate cuts could trigger a pullback to $2,400 or even $2,340.

Investors should adopt a flexible approach: Hold a portion of their gold exposure for the potential breakout but consider reducing risk ahead of the Jackson Hole speech. By monitoring key technical levels and Fed signals, traders can position themselves to capitalize on either outcome. In a market where macro risks and technical setups collide, agility and discipline will be the keys to success.