Gold broke to new record highs on Friday following the Federal Reserve’s decision to slash borrowing costs by 0.50% on Wednesday. This increase in Gold prices is attributed to expectations that global central banks will follow the Fed’s lead in easing policy and cutting interest rates, making Gold more attractive to investors as a non-interest-paying asset.
After the Fed’s decision, several central banks worldwide began cutting interest rates, including the South African Reserve Bank and the Central Bank of the Philippines. The Reserve Bank of India is also expected to lower rates in line with the Fed. Although the People’s Bank of China kept its rates unchanged, they remain at record lows, and the Bank of Japan refrained from a rate hike at its recent meeting.
Gold surpassed the previous record high set on Wednesday, hitting $2,600. The Fed’s positive outlook for US growth, limiting interest rates, had a slight negative impact on Gold prices. However, geopolitical risk aversion, such as tensions in the Middle East, could support safe-haven flows into the precious metal.
A technical analysis of Gold suggests that the uptrend is likely to continue, with targets set at $2,650 and $2,700. The Relative Strength Index (RSI) in the daily chart indicates that Gold is not yet overbought, leaving room for further upside potential. If a correction occurs, support levels are identified at $2,550, $2,544, and $2,530.
The Federal Reserve, which influences interest rates in the US economy, plays a significant role in impacting Gold prices. Their decision to cut rates can lead to a decrease in the US Dollar’s value, making Gold more appealing as an investment option. Traders closely monitor the Fed’s interest rate decisions to gauge the potential direction of Gold prices in the market.
