- Gold price shot to a fresh all-time peak on Tuesday amid dovish Fed-inspired USD selling bias.
- Geopolitical tensions further contributed to driving flows towards the safe-haven XAU/USD.
- Bulls take a pause and await more cues about the Fed’s rate-cut path before placing fresh bets.
Gold price (XAU/USD) holds steady above the $2,500 psychological mark during the Asian session on Wednesday and remains well within the striking distance of the all-time peak touched the previous day. Growing acceptance that the Federal Reserve (Fed) will soon start its policy easing cycle turns out to be a key factor acting as a tailwind for the non-yielding yellow metal. Apart from this, geopolitical tensions and China’s economic woes further underpin the safe-haven commodity.
That said, hopes that tensions in the Middle East were easing, along with the underlying bullish tone across the global financial markets and a modest US Dollar (USD) rebound from a multi-month low, cap gains for the Gold. Traders also prefer to wait for more cues about the Fed’s policy path before placing fresh directional bets. Hence, the focus remains on the July FOMC meeting minutes, due later today, and Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium on Friday.
Daily Digest Market Movers: Gold price awaits more Fed rate cut cues before the next leg up
- Bets for an imminent start of the Federal Reserve’s rate-cutting cycle in September have put the US Treasury bond yields and the US Dollar under pressure, which, in turn, lifted the Gold price to a fresh record high on Tuesday.
- According to the CME Group’s FedWatch Tool, the markets are currently pricing in just over a 70% chance that the US central bank will lower borrowing costs by 25 basis points at the September FOMC monetary policy meeting.
- Moreover, a Reuters poll indicated that a slim majority of economists expect that the Fed will cut interest rates by 25 bps at each of the remaining three meetings of 2024, one more rate reduction than predicted last month.
- Fed Governor Michelle Bowman tried to temper expectations of a near-term rate cut and said that despite the recent progress, price growth levels remain well-elevated and still uncomfortably above the central bank’s 2% goal.
- The People’s Bank of China (PBOC) granted new gold import quotas to several Chinese banks last week in anticipation of reviving demand, suggesting that another Chinese gold buying spree could be on the horizon.
- Furthermore, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, jumped to their highest in seven months at 859 tons on Monday and pointed to improving financial investment demand.
- Meanwhile, geopolitical concerns, particularly in the Middle East and a potential ceasefire between Israel and Hamas, keep investors on edge and turn out to be another factor underpinning the safe-haven XAU/USD.
- Traders, however, turn cautious ahead of the release of the July FOMC meeting minutes later this Wednesday and Fed Chair Jerome Powell’s speech on Friday, which will be looked for cues about the future policy path.
Technical Analysis: Gold price seems poised to appreciate further while above the $2,480 level
From a technical perspective, last Friday’s breakout through the triple top resistance, around the $2,479-2,480 region, and the subsequent strength beyond the $2,500 psychological mark was seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone. This, in turn, suggests that the path of least resistance for the Gold price is to the upside.
Hence, any meaningful pullback might still be seen as a buying opportunity near the $2,500 round figure, which should help the downside for the Gold price near the $2,480 resistance breakpoint. Some follow-through selling, however, could drag the XAU/USD towards the $2,455-2,453 horizontal support en route to the $2,430 region. A convincing break below the latter could drag the metal to the 50-day Simple Moving Average (SMA), currently pegged just below the $2,400 mark.
