In recent news, gold prices have seen a decline of more than 0.50%, as investors anticipate a potential rate cut by the Federal Reserve in September. This speculation has led to prices hovering around $2,450 per troy ounce, with the XAU/USD trading at $2,443 and experiencing losses of 0.20%. The US Dollar Index has also seen an increase of 0.43% to 104.18, while 10-year Treasury yields have risen by 2.5 basis points to 4.187%.
The US Bureau of Labor Statistics (BLS) recently released data showing that more Americans than expected are applying for unemployment benefits. This suggests a potential economic slowdown, which may favor lower interest rates. Furthermore, recent data indicating that inflation is moving towards the Federal Reserve’s goal of 2% is also catching the attention of policymakers.
Despite the rise in new applications for unemployment benefits, there has been no significant change in the labor market according to the Labor Department’s data. Federal Reserve officials have hinted at the possibility of lower borrowing costs, as the risks associated with their dual mandate have become more balanced. However, the International Monetary Fund (IMF) has advised against cutting interest rates until late 2024.
Gold prices recently hit an all-time high of $2,483, but failed to retain these gains as investors opted to book profits. This lack of sustained momentum, coupled with former US President Donald Trump’s trade rhetoric against China, led to increased flows into the US dollar. The US Dollar Index, which measures the dollar against other currencies, saw a 0.43% increase to 104.18, while Treasury bond yields also rose, with the 10-year Treasury note yielding 4.187%.
The weaker-than-expected US Consumer Price Index (CPI) data helped push gold prices above $2,400, as the likelihood of Fed rate cuts caused US Treasury bond yields to fall. US Initial Jobless Claims data showed an increase in the number of Americans filing for unemployment benefits, exceeding expectations. The December 2024 fed funds rate futures contract implies a potential policy easing by 52 basis points by the end of the year.
In terms of technical analysis, the Gold price has experienced a slight pullback below $2,460, indicating that traders are taking a break after a recent rally. While momentum remains bullish in the mid-term, the Relative Strength Index (RSI) suggests a potential downward movement. In the short term, XAU/USD may see further declines below $2,450, with possible targets at $2,400 and even lower. However, a breakthrough above $2,490 could lead to a new all-time high of $2,500.
