Gold prices are reaching all-time highs on Friday as speculation grows over whether the Federal Reserve will implement a 0.50% or 0.25% interest rate cut in September.
The possibility of a larger rate cut is driving another surge in Gold prices, despite concerns of overbought momentum.
Gold Price Movement
On Friday, Gold (XAU/USD) is trading around $2,560, up by 0.40% from the previous day’s high. This surge follows a breakout on Thursday when Gold surpassed its previous range and hit new record highs.
The breakout was triggered by mixed US Producer Price Index (PPI) data for August, which showed a slower-than-expected increase in headline PPI. The market interpreted this as a sign of disinflation, leading to the rally in Gold prices.
Debate Over Fed Interest Rate Cut
The ongoing debate over whether the Fed will implement a 0.50% or 0.25% rate cut next week is fueling Gold’s rally. Despite initial doubts after the release of core Consumer Price Index (CPI) data, recent comments from prominent figures suggest a larger cut is still possible.
Lower interest rates are favorable for Gold as it reduces the cost of holding the non-interest-bearing asset, making it more appealing to investors.
Technical Analysis and Outlook
Gold has broken out of its sideways range and surpassed previous record highs, indicating a bullish trend. While the RSI suggests the metal is overbought, the overall trend remains positive.
The next target for Gold is around $2,590, but a correction may occur if the RSI exits the overbought zone. In such a scenario, support levels are expected at $2,550 and $2,531.
Overall, the bullish trend is likely to continue, pushing Gold prices to new highs in the coming days.
Analysis Breakdown
Gold prices are soaring to record levels amidst speculation over a potential Fed interest rate cut. The debate between a 0.50% or 0.25% cut is driving the rally, supported by recent economic data and comments from key figures. Lower interest rates are boosting Gold’s appeal to investors, leading to a bullish trend in the market. While some caution is advised due to overbought conditions, the overall outlook suggests continued growth in Gold prices.