Gold prices surged over 1% after Federal Reserve Chair Jerome Powell hinted at upcoming rate cuts and expressed confidence in inflation nearing the 2% target. This led to a 0.82% drop in the US Dollar Index (DXY) to 100.68 as traders bet on a 50 basis points rate cut in September. US 10-year Treasury yields also fell five basis points to 3.80%, supporting the rise in gold prices as the market awaited the August Nonfarm Payrolls report for further guidance.
The XAU/USD pair traded at $2510 on Friday following Powell’s comments, which indicated the need for policy adjustment and a shift towards achieving the maximum employment mandate. Gold prices rebounded from daily lows of $2484 as the Greenback extended its losses. The US Dollar Index (DXY) slid 0.82% against a basket of six currencies. Traders increased their bets on a 50 bps rate cut at the September Fed meeting.
Market participants fully priced in a 25 bps rate cut and the odds for a larger cut stood at 36.5% as the Fed shifted its focus towards the job market. The August Nonfarm Payrolls report would be crucial in determining the size of the cut. If US economic data remains subdued, the uptrend in gold prices would continue. Fed officials like Patrick Harker and Austan Goolsbee also made noteworthy comments regarding the need for rate cuts.
Looking ahead, the US economic calendar will feature important data releases such as Durable Goods Orders, CB Consumer Confidence index, Initial Jobless Claims data, and the Core PCE Price Index. Fed speakers including Christopher Waller and Raphael Bostic will also provide insights ahead of the September meeting. Technically, the uptrend in gold prices remains intact and buyers are eyeing the $2,550 mark as the next target.
If Gold manages to surpass the all-time high of $2,531, it could aim for the $2,550 level and potentially even reach the $2,600 mark. On the downside, a daily close below $2,500 could lead to a re-test of the previous all-time high of $2,483, followed by support levels at $2,450 and the 50-day SMA at $2,402. Overall, the outlook for gold remains positive as market participants anticipate further rate cuts and monitor economic data releases for further guidance.
