Gold price continued its upward trend on Monday, reaching $2,433, just shy of its record high of $2,450. Market sentiment remains positive, with the S&P 500 and NASDAQ 100 seeing gains while the Dow Jones is nearly flat. The softer US inflation report from last week has increased expectations that the Federal Reserve may cut interest rates as early as September. Currently, there is a 76% chance of a 25 bps rate cut in September, with investors pricing in two cuts by the end of the year, potentially bringing the fed funds rate down to 4.75%-5.00%.
Despite the increase in US Treasury yields and a weaker US Dollar, gold prices continue to rise. The US 10-year Treasury note yields 4.437% and the DXY index is up 0.06% at 104.55. Last week’s inflation data indicated a softening in underlying prices, sparking expectations of further easing by the US central bank. However, Fed officials have cautioned against assumptions of a slowdown in inflation. Atlanta Fed President Raphael Bostic and Vice-Chair Michel Barr have highlighted the need for maintaining higher rates to support current policy. Vice-Chair Philip Jefferson emphasized uncertainty in predicting the start of disinflation while acknowledging current restrictive policy measures.
Technical analysis shows that gold prices are poised for further gains after hitting a new high of $2,450. Momentum indicators suggest bullish strength, with the Relative Strength Index (RSI) pointing upwards but not yet in the overbought territory. If the XAU/USD pair breaks above the record high, the next targets are at $2,475 and $2,500. On the downside, a retreat below $2,400 could lead to a test of support levels at $2,332 and $2,303 before reaching the 50-day Simple Moving Average at $2,284.
Looking ahead, Federal Reserve speakers will dominate the economic calendar this week, leading up to the release of the latest Fed meeting minutes on Wednesday. Thursday’s US Initial Jobless Claims data is expected to indicate a cooling labor market, along with the Chicago Fed National Activity Index. Despite some hawkish comments from Fed officials regarding inflation, the overall market sentiment remains positive with expectations of further rate cuts by the Fed. Gold prices continue to rise amidst uncertainty, with investors closely monitoring economic data and central bank developments.
