Gold Price Hits Fresh All-Time High Amid Dovish Fed Expectations

  • Gold price soared to a new all-time high on Thursday as Fed expectations turned dovish.
  • The USD remained near the year-to-date low, disregarding positive US data released on Thursday.
  • Market optimism tempered the XAU/USD rally ahead of the critical US PCE Price Index announcement.

The Gold price (XAU/USD) continued its impressive five-day streak of breaking records on Thursday, driven by a renewed wave of US Dollar (USD) selling. Despite efforts from some Federal Reserve (Fed) officials to push back against expectations of aggressive policy easing, the market sentiment still leans towards a substantial rate cut in November. This overshadowed strong US economic data and weighed down on the USD, benefiting the non-yielding precious metal.

Market Insights: Gold Bulls Cautious Amid Risk-On Sentiment and Pending US PCE Price Index

  • Fed Governor Michelle Bowman reiterated her stance against a large rate cut in September, emphasizing lingering inflation risks.
  • Atlanta Fed President Raphael Bostic cautioned against hasty rate cuts, while other Fed policymakers left room for significant cuts.
  • Fed Governor Lisa Cook supported the recent 50 basis points rate cut, citing reduced inflation risks and growing employment concerns.
  • Market expectations, as per CME Group’s FedWatch Tool, show a more than 50% probability of a 50 basis points rate cut in November.
  • US Bureau of Economic Analysis reported a 3% annual growth rate for the US economy in Q2, aligning with initial estimates.
  • US Census Bureau data revealed stagnant durable goods orders in August, with a 0.5% rise excluding transportation items.
  • US Labor Department reported a drop in initial unemployment claims to 218,000, the lowest since mid-May, providing temporary relief for USD bulls.
  • Geopolitical tensions in the Middle East and uncertainties surrounding regional conflicts continue to boost Gold’s safe-haven appeal.
  • Anticipated interest rate cuts globally, coupled with stimulus measures from China, underpin a risk-on sentiment, limiting XAU/USD gains.
  • People’s Bank of China’s repo rate and Reserve Requirement Ratio adjustments further contribute to the risk-on environment.
  • Friday’s US PCE Price Index release could influence Gold’s trajectory as it aims for a third consecutive week of gains.

Technical Analysis: Gold Price Consolidation Precedes Potential Upside, Support at $2,625

Technically, the Relative Strength Index (RSI) signals overbought conditions on the daily chart, prompting a pause in bullish momentum for XAU/USD. However, a recent breakout from a short-term ascending trend channel suggests a bullish bias. While awaiting a consolidation or minor pullback, bulls eye further upside movement in the near term.

A dip towards the channel resistance near $2,625 could attract buying interest, limiting downside pressure around the $2,600 level. A decisive break below $2,600 might open the door for additional downside potential.

Gold FAQs

  • Historical Role: Gold serves as a store of value, medium of exchange, and safe-haven asset during turbulent times.
  • Central Banks: Major holders of Gold, central banks bolster reserves to strengthen currency stability and trust.
  • Market Correlations: Gold inversely correlates with USD, treasuries, and risk assets, making it a diversification tool.
  • Price Influencers: Geopolitical instability, economic uncertainties, and currency movements impact Gold prices significantly.
Shares: