On Thursday, the price of gold (XAU/USD) maintained its upward trajectory, hovering near $2,470 per troy ounce, bolstered by expectations of an imminent interest rate cut by the Federal Reserve. This marks a continuation of record highs for the precious metal, driven by investor preference for non-yielding assets like gold in a low interest rate environment.
Federal Reserve officials have conveyed growing confidence in the inflation outlook aligning with their objectives. Fed Governor Christopher Waller indicated on Wednesday that the central bank is nearing a decision on interest rates, while Richmond Fed President Thomas Barkin noted a broadening ease in inflation pressures which he hopes will persist, as reported by Reuters. Market participants are closely monitoring economic indicators such as the US weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and upcoming speeches from Fed officials including Lorie Logan.
According to CME Group’s FedWatch Tool, market expectations now indicate a 93.5% probability of a 25-basis point rate cut at the Fed’s September meeting, up significantly from 69.7% the previous week.
Meanwhile, the US Dollar Index (DXY), measuring the USD against major currencies, has rebounded to approximately 103.80, supported by improved US Treasury yields. Yields on 2-year and 10-year US Treasury bonds were reported at 4.45% and 4.17%, respectively, at the time of reporting, potentially capping further gains in gold prices.
In technical analysis, the XAU/USD pair remains poised around $2,470, consolidating within an ascending channel on the daily chart, signaling a bullish trend. However, caution is warranted as the 14-day Relative Strength Index (RSI) approaches the overbought territory below the 70 level, suggesting a potential correction in the short term.
Key levels to watch include the nine-day Exponential Moving Average (EMA) at $2,424, serving as immediate support, followed by the lower boundary of the ascending channel at $2,410. A breach below these levels could see the XAU/USD pair testing support near $2,290.
Looking ahead, market sentiment towards gold remains optimistic amidst dovish Fed signals, with potential movements hinging on economic data releases and further clarity from Federal Reserve officials in the coming days.
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