Gold prices (XAU/USD) have gained positive momentum for the second consecutive day on Friday, moving steadily closer to the $2,600 level, near their all-time high, during the early European session. The Federal Reserve’s significant rate cut on Wednesday, along with the projection of a further 50 basis points reduction by the end of the year, has limited the recent rebound in US Treasury yields. This scenario has weakened the US Dollar (USD) and provided support for gold, which does not yield interest.
Additionally, ongoing concerns about economic slowdowns in both the United States and China — the world’s largest economies — and heightened geopolitical tensions in the Middle East have further bolstered gold prices. However, the prevailing risk-on sentiment could potentially restrain bulls from making new positions, thus capping the upside for the safe-haven XAU/USD. Despite this, the precious metal is poised to finish the week in positive territory for the second week in a row, with the overall fundamental backdrop supporting the potential for additional gains.
Daily Digest Market Movers: Gold Prices Hold Steady Near Record High Amid Expectations for More Fed Rate Cuts in 2024
The Federal Reserve’s substantial rate cut on Wednesday and the anticipated further reduction of 50 basis points by the end of this year have not enabled the US Dollar to sustain its post-FOMC rebound from its year-to-date low. Moreover, Fed officials project a decline in rates to 3.4% in 2025, down from a previous estimate of 4.1%, and a drop to 2.9% in 2026, previously forecasted at 3.1%. This outlook revived demand for gold on Thursday.
USD bulls have shown little reaction to the positive US economic data, including a drop in Weekly Initial Jobless Claims to 219K for the week ending September 14, marking the lowest level since May and indicating a resilient labor market. Additionally, the Philadelphia Fed’s survey showed that the current general activity index for manufacturing surged from a seven-month low of -7.0 in August to 1.7 in September, exceeding expectations. Meanwhile, the Fed’s aggressive rate cut has fueled concerns about economic growth, which, along with ongoing worries over a slowdown in China, has provided further support to safe-haven gold. Geopolitical risks stemming from tensions in the Middle East and the Russia-Ukraine conflict also act as a tailwind for the precious metal, amidst US political uncertainties ahead of the November presidential election. Moreover, several Asian central banks and Russia’s continued gold purchases to reduce their dependence on the USD support the bullish outlook and suggest further potential for appreciation in the near term.
Technical Outlook: Gold Prices May Face Resistance Near $2,610-2,615
From a technical standpoint, the $2,600 level, or the recent high set on Wednesday, could serve as resistance, followed by the $2,613-2,615 region, which marks the upper boundary of a short-term ascending trend channel since June. This area is expected to be a critical pivot point. With technical indicators on the daily chart remaining comfortably positive and not yet in overbought territory, a sustained move beyond this resistance could trigger further gains for gold in the near term.
On the downside, the $2,551-2,550 zone now appears to be the first line of support, ahead of the $2,532-2,530 horizontal resistance breakpoint. Continued selling pressure below this level could lead to a decline towards the psychological $2,500 mark. A decisive break beneath this level could accelerate the drop toward the $2,476 area, which coincides with the 50-day Simple Moving Average (SMA) and the lower boundary of the trend channel. A clear breach below this support would indicate a near-term top for XAU/USD, paving the way for a slide toward the 100-day SMA around the $2,412 region and possibly further to the $2,400 mark.
