Gold nears record high as Fed rate cut looms

Gold prices have surged, reaching $2430 per troy ounce on Tuesday, flirting with historic highs. The recent spike in gold prices is largely attributed to comments made by Federal Reserve Chairman Jerome Powell, which have bolstered expectations of an impending interest rate cut.

In his latest address, Powell highlighted that recent U.S. economic indicators are encouraging, suggesting that inflation is moving towards the target. Importantly, he indicated that the Federal Reserve might initiate monetary easing before inflation strictly hits the 2% target mark.

Market anticipation for rate adjustments is palpable, with consensus almost fully expecting a rate cut as early as September, with a potential second cut before year-end. Such monetary policy adjustments typically bolster gold prices, making it an attractive investment in times of lower interest rates.

Concurrently, the political landscape in the U.S. could influence market dynamics. Increasing prospects of Donald Trump's success in the upcoming presidential race could strengthen the U.S. dollar and uplift Treasury yields, potentially tempering gold's rally.

Technical analysis of XAU/USD

The XAU/USD pair has recently executed a significant upward move to $2420.50 and is now oscillating within a consolidation range near this level. We might see an extension of this range up to $2444.44. Should this level be reached, a corrective pullback to $2350.50 could ensue. This scenario is technically supported by the MACD indicator, which shows a strong upward trend.

On the hourly chart, gold has breached the $2420.50 mark and is stabilizing above this threshold. We anticipate further growth towards $2444.44. Upon achieving this peak, a potential reversal towards $2350.50 may occur, marking the commencement of a bearish phase. The Stochastic oscillator, currently positioned above 80, suggests a downward adjustment is likely following the climb.

Investors and traders are advised to monitor these levels closely, especially in light of upcoming economic data and Fed communications which could further sway gold's price trajectory.