Gold price benefits from Fed tapering, buyers eye $2,600

• Gold prices rose following the Fed’s 50 bps rate cut, with officials signaling inflation is moving toward its 2 percent target.
• Fed Chairman Powell signals labor market strength and cautious policy adjustments, saying he is in no rush to normalize rates.
• US jobs data shows resilience, while rising US Treasury yields fail to support the greenback as the DXY falls 0.31% to 100.62.

Gold prices rose on Thursday after the Federal Reserve (Fed) entered an easing cycle with a 50 basis point (bps) rate cut. Traders ignored the rise in US Treasury yields, which correlate inversely with the non-yielding metal, which remains on its way to retrieving $2,600. At the time of writing, XAU/USD is trading at $2,589, up over 1%.

Following the Fed’s decision, bullion prices extended their gains after posting losses on Wednesday. Officials are on the side of the larger of the two cuts expected by Wall Street, justifying their decision by pointing to inflation moving sustainably toward the Fed’s 2 percent target. Fed Chairman Jerome Powell pointed out that the Fed could maintain the strength of the labor force through policy adjustments.

Powell commented that inflation risks have receded while the labor market has picked up. However, he added that if inflation persists, “We can reduce policy more slowly,” adding that the bank’s forecast is “in no rush” to normalize policy.

Meanwhile, US jobs data is in focus after Powell’s speech in Jackson Hole, where he moved to reach the maximum employment mandate. On Thursday, the US Labor Department revealed that the number of people who filed for unemployment benefits was below expectations, indicating the strength of the labor market.

Meanwhile, U.S. Treasury yields are following in gold’s footsteps, with 10-year T notes yielding 3.74%, up three and a half basis points. However, this failed to support the greenback, which according to the US Dollar Index (DXY) fell 0.31% to 100.62.

This week, Philadelphia Fed President Patrick Harker will cross the line amid a limited U.S. record.

Daily market reasons: Gold price recovers on better US labor market data

• Fed Governor Michelle Bowman voted to cut interest rates by a quarter of a percentage point at the September FOMC meeting.
• The Summary of Economic Projections indicates that the Fed expects interest rates to end at 4.4% in 2024 and 3.4% in 2025. Inflation, as measured by the Core Price Index for Personal Consumption Expenditures, is expected to reach the target of 2% by 2026, with forecasts. of 2.6% in 2024 and 2.2% in 2025.
• The US economy is likely to grow at a 2% pace in 2024, with the unemployment rate rising to 4.4% by the end of the year.
• Initial US jobless claims for the week ended September 14 fell from 231,000 to 219,000, below estimates of 230,000.
• US existing home sales fell 2.5% in August after falling from 3.96 million to 3.86 million, falling for the fourth time this year.
• December 2024 federal funds rate futures suggest the Fed could cut rates by at least 69 basis points, implying that in the next two meetings this year, the market expects a rate of 50 bps and one of 25 bps.

XAU/USD Technical Outlook: Gold Price Buyers Target $2,600 After Fed Decision

Gold’s uptrend remains intact, but following the pattern of Wednesday’s Shooting Star candlestick, buyers need to challenge the year-to-date high of $2,599 if they want to hang onto the hope of conquering the $2,600 mark.

Momentum favors buyers. The Relative Strength Index (RSI) targets bullish territory and not overbought territory. Therefore, the path of least resistance is upward sloping.

XAU/USD’s first resistance would be $2,599, followed by $2,600. Additionally, buyers can challenge the psychological levels of $2,650 and $2,700.

If XAU/USD breaks below the September 13 low of $2,556, the next support would be $2,550. Once released, the next stop will be the August 20 high, which turned into support at $2,531, before targeting the September 6 low of $2,485.