Gold prices soared by over 1% following comments from Federal Reserve Chair Jerome Powell, who suggested that rate cuts might be on the horizon. Powell’s optimistic outlook on inflation, which he believes is approaching the Fed’s 2% target, has fueled expectations of a more accommodative monetary policy. In response, the US Dollar Index (DXY) slipped by 0.82%, settling at 100.68, as traders increasingly anticipate a 50 basis point rate cut in September. Meanwhile, the yield on the US 10-year Treasury note dropped five basis points to 3.80%, providing additional support for gold. Investors now turn their attention to the upcoming August Nonfarm Payrolls report for further insights into the economic outlook.
Gold prices climbed more than 1% on Friday as the US Dollar and Treasury bond yields declined following dovish comments from Federal Reserve Chair Jerome Powell. Powell’s remarks signaled his confidence that inflation is moving closer to the Fed’s 2% target, suggesting that interest rate cuts may be forthcoming. As a result, XAU/USD is trading at $2,510, having rebounded from a daily low of $2,484.
The surge in prices came after Powell stated, “It is time for policy to adapt,” indicating that the Federal Reserve is now more focused on adjusting rates in response to economic conditions. He also highlighted that inflation is nearing the desired 2% level and emphasized the Fed’s commitment to prioritizing maximum employment.
Following those comments, the market reclaimed the $2,500 level, while the US Dollar continued to weaken. The US Dollar Index (DXY), which tracks the dollar’s value against a basket of six major currencies, fell by 0.82%, trading at 100.68.
US Treasury bond yields also saw an immediate decline, with the benchmark 10-year note dropping five basis points to 3.80%. Traders have ramped up their expectations for a 50 basis point rate cut by the Federal Reserve at the September meeting.
According to the CME FedWatch Tool, the market had already fully priced in a 25 basis point rate cut, but the probability of a more significant 50 basis point cut has risen to 36.5%, up from 24% the previous day.
With the Fed now focusing more on the labor market, the upcoming August Nonfarm Payrolls report will be crucial in shaping expectations for the scale of the rate cut.
Technical Analysis: Uptrend Remains Strong as Buyers Target $2,550
Gold’s uptrend appears to be holding strong and could continue if buyers push prices beyond the all-time high of $2,531. Breaking above this level would open the door to a potential move toward $2,550, and possibly even $2,600.
Conversely, if the market ends the day below $2,500, a retest of the previous all-time high of $2,483 could be likely. Should this level fail to hold, the next support zone to watch would be the May 20 peak at $2,450. However, the market continues to show a strong bullish trend, as we see the price action bouncing back and moving in an upward direction on Friday, following a brief correction from the high of $2,530.
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