Gold prices (XAU/USD) have surged for the second consecutive day, reaching a two-week high around the $2,375 mark during Thursday’s European session. This uptrend is underpinned by growing optimism among investors, who anticipate major central banks to implement interest rate cuts in a bid to stimulate economic growth. The Bank of Canada’s recent rate cut, its first in four years, alongside the European Central Bank‘s expected rate reduction, set a bullish tone for the precious metal market.
The sentiment is further bolstered by mounting expectations of an imminent rate cut by the Federal Reserve, prompted by signs of a slowdown in the US economy. The anticipation of lower borrowing costs has pushed US Treasury bond yields to their lowest level in over two months, while failing to provide substantial support to the US Dollar‘s recent recovery.
Geopolitical tensions in the Middle East have added to the appeal of gold as a safe-haven asset, contributing to its upward trajectory. Despite these supportive factors, the potential for further gains in XAU/USD is viewed cautiously ahead of the release of the US Nonfarm Payrolls (NFP) report on Friday.
On the data front, Wednesday’s release of mixed US macroeconomic indicators reinforced expectations of Fed rate cuts. Private sector employment, as reported by the Automatic Data Processing (ADP), fell short of forecasts, while the Institute for Supply Management’s (ISM) Services PMI exceeded expectations, signaling robust economic activity. However, softer inflationary pressures, highlighted by the US Personal Consumption Expenditures (PCE) Price Index, coupled with declining US Treasury bond yields, provided additional support to gold prices.
From a technical standpoint, gold prices face a formidable resistance near the $2,400 level, with momentum beyond the $2,364 mark triggering bullish sentiments. However, caution is advised as mixed signals from oscillators on the daily chart suggest potential hurdles. A breakthrough above $2,400 could propel prices towards the $2,425 zone, with further gains targeting the all-time peak touched in May at around $2,450.
Conversely, a retreat below the $2,360 level may attract buying interest near the $2,340 support zone, limiting downside risk. A decisive breach below this level could signal a deeper correction, potentially testing the 50-day Simple Moving Average (SMA) and support at $2,280.
Overall, while gold prices continue to benefit from supportive macroeconomic factors and geopolitical tensions, traders await the NFP report for further direction.
Related Topics:
Why Is the Federal Reserve Interest Rate a Range?
Can the Federal Reserve Set the Federal Funds Rate?
What Rate Does the Federal Reserve Set?
