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Gold price bulls retain control near all-time peak amid bets for a larger Fed rate cut

  • Gold price scales higher for the second straight day and climbs to a fresh all-time high. 
  • Rising bets for a larger Fed rate cut weigh on the USD and boost the precious metal.
  • Geopolitical tensions contribute to driving flows towards the safe-haven XAU/USD.

Gold price (XAU/USD) sticks to its modest intraday gains heading into the European session on Friday and is currently placed near the $2,565-$2,570 area, or the record high. The softer-than-expected US Producer Price Index (PPI) report released on Thursday provided further evidence that inflation was subsiding and lifted bets for a larger interest rate cut by the Federal Reserve (Fed) next week. This is reinforced by a fresh leg down in the US Treasury bond yields, which drags the US Dollar (USD) to over a one-week low and continues to act as a tailwind for the non-yielding yellow metal.

Apart from this, persistent geopolitical risks stemming from the ongoing conflicts in the Middle East and the protracted Russia-Ukraine war lend additional support to the safe-haven Gold price. This, in turn, validates the overnight breakout through a multi-week-old trading range and supports prospects for a further near-term appreciating move. Bulls, however, might prefer to move to the sidelines ahead of next week's key central bank event risks – the Fed decision on Wednesday, followed by the Bank of England (BoE) and the Bank of Japan (BoJ) meetings on Thursday and Friday, respectively. 

Daily Digest Market Movers: Gold price benefits from dovish Fed-inspired broad-based USD weakness

  • Rising bets for a larger interest rate cut by the Federal Reserve, along with geopolitical risks, lift the Gold price to a fresh all-time high on Friday and confirm a bullish breakout through a multi-week-old trading range.
  • The US Bureau of Labor Statistics reported on Thursday that the annual headline Producer Price Index (PPI) rose 1.7% against estimates of 1.8% and the previous month's reading was revised down to 2.1% from 2.2%.
  • Adding to this, the core PPI, which excludes volatile food and energy prices, came in at 2.4% YoY, also missing expectations for a reading of 2.5% and further pointing to signs of easing inflationary pressures in the US. 
  • Separately, data published by the US Department of Labor (DoL) showed that the number of individuals who applied for unemployment insurance benefits for the first time rose to 230K in the week ending September 7.
  • According to the CME Group's FedWatch Tool, market players are now pricing in over a 40% chance that the US central bank will lower borrowing costs by 50-basis points at the end of a two-day meeting next Wednesday. 
  • Israel intensified airstrikes on Iranian-linked targets in Syria, while Hamas and Hezbollah pounded northern Israel on September 11 in one of the largest aerial attacks, fueling concerns over a wider conflict in the Middle East.
  • Russian President Vladimir Putin warned on Friday that he would regard an agreement to allow Ukraine to strike targets inside Russia with Western-supplied missiles as tantamount to NATO directly entering the war.
  • Investors now look forward to the release of the Preliminary Michigan US Consumer Sentiment Index to grab short-term opportunities around the XAU/USD, which remains on track to register strong weekly gains.

Technical Outlook: Gold price technical setup favors bulls, breakout through $2,525-$2,530 hurdle in play

From a technical perspective, the recent move up from the June swing low constitutes the formation of an ascending channel and points to a well-established uptrend. Moreover, Thursday's close above the $2,525-2,526 supply zone and a subsequent move beyond the previous all-time peak, near the $2,531-2,532 area was seen as a fresh trigger for bullish traders. With oscillators on the daily chart holding in positive territory and still away from being in the overbought zone, the Gold price seems poised to climb further towards challenging the trend-channel resistance, currently pegged just ahead of the $2,600 mark. The latter should act as a strong barrier ahead of the FOMC meeting next week.

On the flip side, any meaningful corrective fall is likely to attract fresh buyers near the $2,530-2,525 resistance breakpoint. This should help limit the downside near the $2,500 psychological mark, which should now act as a strong base for the Gold price and a key pivotal point for short-term traders. That said, some follow-through selling, leading to a further decline below the weekly low, around the $2,485 region, could drag the XAU/USD to the $2,470 horizontal support en route to the $2,457-2,456 confluence. The latter comprises the lower boundary of the aforementioned channel and the 50-day Simple Moving Average (SMA), which if broken decisively might shift the near-term bias in favor of bearish traders.

US Dollar PRICE Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.

 USDEURGBPJPYCADAUDNZDCHF
USD -0.03%-0.14%-0.62%0.00%0.03%-0.01%-0.20%
EUR0.03% -0.12%-0.58%0.02%0.06%0.09%-0.17%
GBP0.14%0.12% -0.44%0.12%0.17%0.22%-0.06%
JPY0.62%0.58%0.44% 0.62%0.64%0.66%0.42%
CAD-0.00%-0.02%-0.12%-0.62% 0.00%0.09%-0.20%
AUD-0.03%-0.06%-0.17%-0.64%-0.01% 0.05%-0.23%
NZD0.00%-0.09%-0.22%-0.66%-0.09%-0.05% -0.28%
CHF0.20%0.17%0.06%-0.42%0.20%0.23%0.28% 

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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