Gold Prices Surge as US Dollar Weakens and Treasury Yields Drop: What Investors Need to Know
- Gold price increases as US Treasury yields drop and the US Dollar weakens.
- Traders await US CPI data; Fed rate cut odds are 67% for a 25 bps reduction and 33% for 50 bps.
- Focus shifts to the first US presidential debate, potentially impacting market sentiment ahead of election.
Gold prices are on the rise as the US Dollar weakens and US Treasury yields decline. Investors are closely watching the upcoming US Consumer Price Index (CPI) data, with expectations of a rate cut by the Federal Reserve. Additionally, the first US presidential debate between Vice President Kamala Harris and former President Donald Trump could impact market sentiment leading up to the election. Currently, XAU/USD is trading at $2,514 after bouncing back from daily lows of $2,500.
The market sentiment has improved slightly, leading to a decrease in the US Dollar’s strength, which is favorable for gold. US Treasury yields have also dropped as traders await the latest CPI reading. The Federal Reserve is expected to maintain a dovish stance due to concerns about the weakening labor market.
Recent US jobs data showed fewer additions to the workforce than anticipated, but the Unemployment Rate decreased, providing some relief to Fed policymakers. The odds of a rate cut have increased, with a 67% chance of a 25 bps reduction and a 33% chance of a 50 bps cut according to the CME FedWatch Tool.
The upcoming US Presidential Election on November 5 is also gaining attention, with the first debate scheduled between Vice President Kamala Harris and Donald Trump. This event could have significant implications for the financial markets.
Analysis of Market Moves Impacting Gold Prices
- Gold price is climbing as the US Dollar weakens, with the US Dollar Index (DXY) remaining stable at 101.62.
- US 10-year T-note yield has dropped by five basis points to 3.648%, reflecting traders’ positioning ahead of the upcoming Fed meeting.
- US August CPI is expected to decrease from 2.9% to 2.6% YoY, while core CPI is projected to stay at 3.2%.
- Last week’s NFP report showed a lower than expected addition to the workforce, but the decrease in the Unemployment Rate supported the US Dollar.
- Fed officials have been dovish, signaling a potential rate cut at the upcoming FOMC meeting.
- Market data suggests that the Fed could cut rates by at least 108 bps this year.
Technical Analysis of Gold Price Movement
From a technical perspective, XAU/USD is steadily climbing but has not surpassed the all-time high of $2,531. Momentum indicators suggest sideways trading, with resistance at $2,550 and potential support at $2,470. Further support levels include the May 20 high and the 50-day SMA between $2,450 and $2,440.
