The Gold Market: A Closer Look at Recent Trends
- Gold prices fall for the second consecutive day, down 0.6%.
- The US Dollar Index rises as Fed Chair Powell signals two more 25 bps rate cuts for 2024.
- Gold remains up over 5.40% for September, its best month since March 2024.
Gold prices are experiencing a decline for the second day in a row, despite falling US Treasury yields and escalating geopolitical risks. The market is witnessing a shift towards the US Dollar, as Federal Reserve Chair Powell hints at additional rate cuts for the upcoming year. However, despite these recent setbacks, Gold is still showing a positive growth trend for September, with a remarkable increase of over 5.40%.
As of now, the XAU/USD pair is trading at $2,639, marking a decrease of 0.6% in value.
Market Insights and Analysis
Wall Street is displaying mixed trends as Fed Chair Jerome Powell addresses the 66th NABE Annual Meeting. Powell’s remarks have downplayed the possibility of a 50-basis-point rate cut, focusing instead on two 25 bps cuts for 2024, assuming the economy progresses as expected.
The US Dollar Index (DXY) has risen by 0.15% to 100.56, acting as a hindrance for Gold prices due to its non-yielding nature. Economic data from the US, including the Chicago PMI, has shown some improvement, although it remains in the contractionary zone.
Geopolitical tensions have heightened following Israel’s attack on Hezbollah in Lebanon, resulting in the death of its leader. Despite this event typically leading to a rise in Gold prices, Bullion has not seen a significant uptick.
On the other hand, China’s economy is facing challenges, prompting the People’s Bank of China (PBoC) to introduce additional stimulus measures. This move has directed investments towards the thriving Chinese equities market.
Daily Market Movers
- The Chicago PMI has shown improvement for the third consecutive month, surpassing expectations.
- The latest PCE Price Index report indicates mixed results, with headline inflation slightly below consensus estimates.
- Market odds of a 25 bps rate cut have increased, while the chances of a 50 bps cut have also risen.
Technical Analysis of XAU/USD
Following a peak at $2,685, Gold has witnessed a 2% decline, potentially leading to further losses towards the $2,600 level. Despite short-term bearish momentum, the overall sentiment remains bullish.
Traders should be cautious of the current market dynamics and capitalize on short-term movements while understanding the prevailing bullish trend. Key support levels to watch include $2,650, $2,600, and $2,546, with resistance levels at $2,685, $2,700, and $2,750.
Fed FAQs
Monetary policy in the US is primarily influenced by the Federal Reserve (Fed), which aims to maintain price stability and promote full employment through interest rate adjustments. The Fed conducts policy meetings throughout the year, where decisions are made based on economic conditions. In extreme situations, the Fed may resort to measures like Quantitative Easing (QE) to stimulate the economy.