Gold rises near all-time highs amid favorable Fed and USD expectations

• The price of gold is trading in a slight uptrend and remains close to the all-time high set on Wednesday.
• Bets on more Fed rate cuts are keeping USD bulls on the defensive and supporting commodities.
• Concerns about the US/China economic outlook and geopolitical risks further benefit XAU/USD.

The price of gold (XAU/USD) attracted some buyers for the second day in a row on Friday and returned closer to the all-time high reached in reaction to the outsized interest rate cut by the Federal Reserve (Fed) earlier this week. Moreover, the US central bank has indicated that more interest rate cuts are on the horizon, which keeps US dollar (USD) bulls on the defensive and continues to act as a tailwind for the non-yielding yellow metal.

Apart from this, concerns about the slowdown in the United States (US) and China – the world’s two largest economies – and geopolitical risks stemming from conflicts in the Middle East are providing additional support to the price of gold. That said, increased risk in global equity markets is preventing bulls from placing new bets around the safe-haven XAU/USD and keeping any significant upside in check during the Asian session.

Meanwhile, market reaction to the Bank of Japan’s (BoJ) policy update was limited and failed to provide any significant boost to gold prices. However, XAU/USD looks poised for modest gains for the second week in a row, and the fundamental context suggests that the path of least resistance is up. Traders are now looking to a scheduled speech by Philadelphia Fed President Patrick Harker for a boost.

Daily Digest Market Movers: Gold price flirts with record high amid bets for more Fed rate cuts

• The Federal Reserve’s jumbo rate cut on Wednesday and the forecast for another 50 basis points in borrowing costs by the end of this year have not helped the US dollar capitalize on the post-FOMC recovery from the YTD trough.
• Moreover, Fed policymakers forecast interest rates to fall to 3.4% in 2025, down from a previous forecast of 4.1%, and to fall to 2.9% in 2026, down from a previous forecast of 3.1%, which revived demand for Thursday’s gold price.
• USD bulls appear unfazed by upbeat US macro data showing weekly initial jobless claims fell to 219k in the week ended September 14, marking the lowest level since May and pointing to a resilient labor market.
• In addition, the Philadelphia Fed survey showed that the current general activity index for manufacturing jumped from a seven-month low of -7.0 in August to 1.7 in September, beating consensus estimates.
• Meanwhile, the Fed’s outsized rate cut fueled concerns about economic growth, which, along with lingering worries about a slowdown in China, proved to be another factor benefiting XAU/USD, a haven sure.
• In addition, geopolitical risks stemming from tensions in the Middle East and the Russia-Ukraine war are acting as a tailwind for the precious metal amid political uncertainty in the US ahead of the November presidential election.
• Apart from this, the fact that several Asian central banks and Russia are buying gold to reduce their dependence on the USD favors bullish traders and supports the prospects for another short-term appreciation move.

Technical Outlook: Gold price looks poised to challenge upward channel resistance near the $2,613-$2,615 area

From a technical perspective, the $2,600 round mark or the all-time high set on Wednesday could provide some resistance ahead of the $2,613-2,615 region. The latter represents the upper limit of a short-term uptrend channel that has been extending since June and should act as a key pivot point. With the oscillators on the daily chart holding comfortably in positive territory and still far from being in the overbought zone, a sustained strength beyond the said barrier will be seen as a new trigger for the bulls and pave the way for a new move up short-term appreciation for the price of gold.

On the other hand, the $2,551-2,550 area now appears to be protecting the immediate downside ahead of the horizontal resistance break at $2,532-2,530. Some further selling could expose the psychological $2,500 mark, below which gold prices could accelerate the slide towards the $2,476 confluence – comprising the 50-day Simple Moving Average (SMA) and the lower boundary of the channel. A convincing break below will suggest that XAU/USD has broken short-term, setting the stage for a slide to the 100-day SMA around the $2,412 region on its way to the $2,400 mark.