Gold Price Rises as Fed Rate Cut Bets Weigh on USD
- Gold price (XAU/USD) continues its upward trend for the second consecutive day on Friday.
- The USD remains under pressure due to expectations of Fed rate cuts, supporting the precious metal.
- Market sentiment shifts as chances of aggressive Fed easing diminish ahead of US PPI release.
Gold price has seen a positive momentum over the past two days, rebounding from a three-week low near $2,600. This rise can be attributed to the latest US macro data, indicating a slowdown in annual Consumer Price Index (CPI) growth and an increase in weekly jobless claims. These factors suggest that the Federal Reserve (Fed) will continue its interest rate cuts, keeping the USD on the defensive and benefiting gold.
Despite the Fed’s dovish stance, the market has scaled back expectations for a more aggressive easing. The recent release of the September FOMC meeting minutes reaffirms this sentiment, which may limit further gains in gold. Additionally, anticipation of China’s fiscal stimulus announcement could suppress the safe-haven appeal of gold. Traders should exercise caution, especially with the upcoming US Producer Price Index (PPI) report.
Key Market Insights on Gold Price Movement
- The US Consumer Price Index rose by 2.4% annually, while the core index, excluding food and energy prices, increased by 3.3%.
- Speculations of a slower pace of Fed rate cuts emerged after stronger inflation data, boosting the USD temporarily.
- Jobless claims in the US rose by 33,000, indicating potential weaknesses in the labor market.
- The Fed’s focus on employment suggests continued rate cuts, supporting gold as a non-yielding asset.
- The yield on the 10-year US government bond remains above 4%, benefiting the USD and potentially limiting gold’s gains.
- China’s fiscal stimulus measures could impact market sentiment and influence gold price movements.
- Traders are eagerly awaiting the US PPI report for short-term trading opportunities in the gold market.
Technical Analysis: Gold Price Outlook
Technical indicators suggest a bullish outlook for gold, with a potential challenge to the previous all-time high near $2,685-2,686. The current support level around $2,630 favors buyers, with resistance levels at $2,657-2,658 and $2,670-$2,672. A breakthrough could lead to further gains towards $2,700, solidifying the uptrend.
On the downside, a breach of the $2,630 support could signal a bearish trend, targeting key levels at $2,600 and $2,560. Further downside could lead to a test of the $2,535-2,530 region and potentially the $2,500 mark.
Gold FAQs: Essential Information for Investors
- Gold is a historical store of value and considered a safe-haven asset during turbulent times.
- Central banks hold significant gold reserves to strengthen their currencies and bolster trust in their economies.
- Gold has an inverse relationship with the USD and US Treasuries, acting as a diversification asset.
- Price movements in gold are influenced by geopolitical events, economic conditions, and USD performance.