Gold prices continued to rise despite positive economic indicators in the US, such as an increase in the Gross Domestic Product (GDP) figures and a decrease in unemployment claims. Even though the US Treasury yields and the US Dollar Index (DXY) were up, Gold prices continued their upward trend in anticipation of the Federal Reserve’s (Fed) first rate cut, with the XAU/USD posting gains of 0.78% and exchanging hands at $2,523.
Market sentiment remained positive as traders eagerly awaited data that could confirm the size of the Fed’s first rate cut. The US Bureau of Economic Analysis reported that the country’s growth in Q2 2024 was above the preliminary release, which helped to lift the Personal Consumption Expenditures Price Index (PCE) Deflator. Additionally, the US Department of Labor revealed that fewer Americans than expected applied for unemployment benefits, providing relief for the Fed.
Despite these positive economic indicators, Gold prices continued to climb above $2,520, even as the US 10-year Treasury note yield rose. Traders expected a rate cut in September, with the CME FedWatch Tool showing a 65.5% likelihood of a 25 basis point rate cut. The core Personal Consumption Expenditures Price Index (PCE) is expected to slightly increase, according to market consensus, which could impact the Fed’s decisions.
If US economic data continues to indicate weakness, the Gold price uptrend is expected to persist, leading to speculation about a larger rate cut by the Fed. The second estimate of US GDP for Q2 2024 showed significant growth, surpassing estimates, and the PCE Deflator indicated inflation dipped slightly. Initial Jobless Claims for the week ending August 24 decreased, and next week’s August Nonfarm Payrolls report will be crucial in assessing the Fed’s rate cut in September.
Gold prices continue to trend upwards, with buyers aiming for the $2,550 mark. Momentum shows that buyers are in control, as reflected in the Relative Strength Index (RSI). If XAU/USD surpasses the all-time high at $2,531, the next resistance level would be $2,600. Conversely, if Gold prices fall below $2,500, the first support level would be $2,483, followed by the $2,450 psychological mark and the 50-day Simple Moving Average at $2,414.
Monetary policy in the US is determined by the Federal Reserve (Fed), which aims to achieve price stability and foster full employment. Interest rates are the primary tool used by the Fed to adjust economic conditions. The Fed holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. In extreme situations, the Fed may implement Quantitative Easing (QE) or Quantitative Tightening (QT) to boost or restrict credit flow in the economy, respectively. QE usually weakens the US Dollar, while QT is positive for the Greenback’s value.
