Gold price rises to record high on firm US yields

• Gold hits an all-time high of $2,685, supported by China’s stimulus and Middle East tensions.
• Despite the strong US Dollar, the Fed’s recent 50 bps rate cut is fueling bullish sentiment for continued gains in Bullion.
• US economic data points to a “soft landing” scenario, keeping market optimism high for gold going forward.

Gold hit a new all-time high of $2,685 on Thursday as the greenback began to recover from earlier losses in the Asian and European sessions. US data paints a “soft landing” scenario, while China’s stimulus and rising tensions in the Middle East boosted bullion prices. At the time of writing, XAU/USD is trading at $2,670.

Sentiment remains positive as shown by US stocks. US Treasury yields were flat, with the 10-year T-note yielding 3.798%, up one basis point (bps), while the greenback, as represented by the US Dollar Index (DXY), is steady at 100.91.

China news supports Gold’s upward movement. The Politburo remains firm on stabilizing the housing market, adding more fiscal stimulus after the People’s Bank of China (PBoC) cut 7-day reverse repo rates by 20bps, taking rates from 1.70% to 1.50%.

That and last week’s 50 bps rate cut by the Federal Reserve (Fed) pushed the gold metal to further record highs as global central banks cut borrowing costs. Even as the US dollar remained strong, expectations that the Fed would embark on an “aggressive” easing cycle kept bulls following the trend.

The US economy grew sharply in the second quarter of 2024, according to the Bureau of Economic Analysis (BEA). Meanwhile, the US Labor Department revealed that fewer people filed for unemployment benefits last week, a sign that the labor market remains strong.

Daily market reasons: Gold price remains firm amid high US yields

• Missile strikes between Israel and Hezbollah support gold prices.
• US Gross Domestic Product (GDP) for Q2 in its final reading was 3%, beating estimates of 2.9%.
• US durable goods orders in August were unchanged at 0%, beating forecasts for a -2.6% contraction, but missing July’s 9.8% increase.
• Initial jobless claims for the week ended Sept. 21 were 218,000, below estimates for a jump of 225,000 and the previous reading of 222,000.
• According to the World Gold Council, physical-backed global gold ETFs saw modest net inflows of 3 tonnes last week.
• Market participants fully priced in a rate cut of at least 25 bps by the Fed. However, according to the CME FedWatch tool, the odds of a 50bps cut fell to 51.3%, down from a 60% chance the previous day.

XAU/USD Technical Outlook: Gold price advances above $2,660

The price of gold hit a record high of $2,685 on Thursday, but retreated to current spot prices. However, momentum favors the buyers, although the rally appears overextended as the Relative Strength Index (RSI) climbs further into overbought territory, close to testing extreme levels above 80.

If XAU/USD extends its rally beyond the current year-to-date (YTD) high of $2,685, the next resistance would be the $2,700 level. The $2,750 level is next, followed by $2,800.

On the other hand, if XAU/USD breaks below $2,650, look for a test of the September 18 daily high at $2,600. The next key support levels to test will be the September 18 low of $2,546, followed by the 50-day Simple Moving Average (SMA) at $2,488.