Gold Hits Record Highs Above $2,600
- Gold climbed to a new record high above $2,600 this week.
- The near-term technical outlook suggests that XAU/USD is close to turning overbought.
- Fedspeak and PCE inflation data could influence Gold’s valuation next week.
Gold (XAU/USD) soared to unprecedented levels above $2,600 as the US Dollar (USD) faced significant selling pressure post the Federal Reserve’s (Fed) decision to cut the policy rate by 50 basis points. As Gold approaches potential overbought territory, all eyes are on the upcoming Personal Consumption Expenditures (PCE) Price Index data release, expected to be a major catalyst for Gold’s valuation.
Gold Bulls React to Dovish Fed Decision
Amid a bullish end to the previous week, Gold entered a consolidation phase at the start of the week. Market sentiment turned cautious ahead of the Fed’s policy announcements, causing XAU/USD to close lower on Tuesday.
On Wednesday, the Fed surprised markets by cutting the policy rate by 50 bps to 4.75%-5%. This move, which deviated from the expected 25 bps cut, triggered a USD sell-off and propelled Gold to a new record high above $2,600. Despite a brief USD recovery later in the day, Gold closed in the red as risk sentiment shifted and investors questioned the Fed’s response to economic challenges.
Following Fed Chairman Jerome Powell’s reassuring comments on the job market and economic growth prospects, markets regained some confidence. However, renewed risk flows on Thursday pushed the USD lower again, allowing Gold to extend its rally and reach another all-time high.
Gold Investors Watch US Data and Fedspeak
Next week’s focus will be on key US data releases and Fedspeak:
- S&P Global Manufacturing and Services PMI data: Investors await these figures for insights into the economic outlook.
- BEA’s GDP data and PCE Price Index: These releases will provide further clues on inflation and economic health.
- Fed policymakers’ comments: Market reactions will be influenced by policymakers’ stance on future rate cuts.
Market expectations of additional rate cuts and economic indicators will shape Gold’s trajectory in the coming days.
Gold Technical Outlook
Technical analysis indicates:
- RSI indicator at 70: Gold is nearing overbought levels.
- Ascending regression channel: Key resistance at $2,630.
- Support levels: $2,600, $2,570, and $2,530.
With Gold already in uncharted territory, future price targets remain uncertain. However, $2,700 could be a significant resistance level if overbought conditions are ignored.
Fed FAQs
Key information about the Federal Reserve (Fed) and its policies:
- Mandates: Price stability and full employment.
- FOMC meetings: Assess economic conditions and set monetary policies.
- Quantitative Easing (QE): Used during crises to increase credit flow.
- Quantitative Tightening (QT): Reverse of QE, positive for the USD.