Gold price has entered a bullish consolidation phase near its all-time peak, benefiting from bets for more Federal Reserve rate cuts, which have kept the US Dollar bulls on the defensive. The concerns over the economic outlook of the US and China, as well as geopolitical risks, have also contributed to the positive momentum of the XAU/USD.
The rally in Gold price was triggered by the Federal Reserve’s decision to start a policy easing cycle with an oversized rate cut. Expectations of further rate cuts by the US central bank led to fresh USD selling, which further supported the non-yielding yellow metal. The concerns over a slowdown in the US and China, along with persistent geopolitical risks, provided additional support for the Gold price.
Despite the risk-on sentiment in global equity markets, Gold price remains on track to end the week in the green for the second consecutive week. The fundamental backdrop seems to favor bullish traders, supporting prospects for an extension of the commodity’s uptrend. Traders are now focusing on the crucial Bank of Japan policy update, which could infuse volatility and provide further impetus to the XAU/USD.
The Federal Reserve’s jumbo rate cut and the forecast for more cuts failed to boost the US Dollar, leading to demand for Gold on Thursday. Positive US macro data, such as a decrease in Weekly Initial Jobless Claims and an uptick in the Philadelphia Fed’s survey, did not have a significant impact on the USD bulls. The concerns over economic growth and geopolitical risks, along with tensions in the Middle East and the Russia-Ukraine war, continue to support the safe-haven appeal of Gold.
From a technical standpoint, Gold price might face resistance near the top end of a short-term ascending channel, with the $2,600 mark and the $2,613-2,615 region serving as key levels to watch. On the downside, the $2,551-2,550 area and the $2,532-2,530 region could act as support levels. A sustained strength beyond the resistance barrier could trigger further upside for the Gold price, while a break below key support levels could signal a near-term reversal.
Gold has a rich history as a store of value and medium of exchange, and it is widely viewed as a safe-haven asset during turbulent times. Central banks are major holders of Gold, with many diversifying their reserves to improve perceived strength during economic uncertainties. Gold has an inverse correlation with the US Dollar and US Treasuries, making it an attractive asset for diversification. The price of Gold can be influenced by various factors, including geopolitical instability, economic fears, interest rates, and the performance of the US Dollar.
