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.