Gold prices experienced a slight setback for the second consecutive day, declining by 0.6% despite falling US Treasury yields and increasing geopolitical tensions. The rise in the US Dollar Index further dampened Gold’s momentum as Fed Chair Powell hinted at two more 25 bps rate cuts for 2024. However, despite recent losses, Gold remains up over 5.40% in September, marking its best monthly performance since March 2024.
Amid month-end flows favoring the Greenback and despite falling US Treasury yields, Gold prices retreated, with the XAU/USD trading at $2,639. The month of September is set to witness Gold registering monthly gains of over 5.40%, making it the best month for the precious metal since March 2024. In that particular month, Bullion prices rose over 9%, indicating a positive trend for Gold in recent months.
Federal Reserve Chair Jerome Powell’s speech at the 66th NABE Annual Meeting had an impact on Wall Street, leading to mixed trading. Powell dismissed the possibility of a 50-basis-point rate cut in the remaining policy meetings but mentioned the potential for two more 25 bps cuts in 2024 if the economy performs as anticipated. The US Dollar Index (DXY) rose to 100.56, presenting a challenge for Gold as a non-yielding asset.
Despite geopolitical tensions escalating after Israel’s attack on Hezbollah in Lebanon, resulting in the death of its leader, Gold prices failed to gain traction. Analysts suggest that the heightened tensions could lead to upside potential for Gold, but the precious metal has not responded positively. Moreover, concerns about China’s slowing economy have prompted the People’s Bank of China (PBoC) to implement additional stimulus measures, diverting flows towards the equities market.
In terms of economic indicators, the Chicago Fed National Activity Index, also known as the Chicago PMI, improved for the third consecutive month, reaching 46.6. The latest Personal Consumption Expenditures (PCE) Price Index report yielded mixed results, with headline inflation in August at 2.2% YoY, slightly below consensus estimates. Market participants have increased the likelihood of a 25 bps rate cut to 56.4%, while expectations for a larger 50 bps cut stand at 43.6%.
From a technical analysis perspective, XAU/USD has experienced a slight slump after reaching an all-time high of $2,685, with the precious metal trading around $2,630. While short-term momentum favors bears, Gold remains bullish overall. Traders should be cautious of potential downward moves towards the $2,600 level, with support levels at $2,546 and the 50-day Simple Moving Average (SMA) at $2,503. On the upside, a rally above $2,650 could lead to further gains towards $2,685, $2,700, and potentially $2,750.
Amidst these market developments, Federal Reserve Chair Jerome Powell’s speeches and policy decisions continue to play a crucial role in shaping investor sentiment and market dynamics. Powell’s tenure, starting in 2012 as a member of the Board of Governors and subsequent appointment as Chair in 2018, has been marked by significant policy decisions and communication that have had a notable impact on various asset classes, including Gold.
