Gold price falls on strong USD as Powell speaks

• Gold prices fell for a second day in a row, down 0.6 percent, despite falling U.S. Treasury yields and rising geopolitical risks.
• The US dollar index rises as Fed Chairman Powell signals two more 25bps interest rate cuts for 2024, dampening gold’s momentum.
• Despite recent losses, gold remains up more than 5.40% for September, marking its best monthly performance since March 2024.

Gold retreated for a second straight day amid end-of-month flows favoring the greenback despite falling US Treasury yields. However, the gold metal will post monthly gains of more than 5.40% in September, its best month since March 2024, when bullion prices rose more than 9%. XAU/USD is trading at $2,639, down over 0.6%.

Trading on Wall Street is mixed as Federal Reserve (Fed) Chairman Jerome Powell delivers a speech at NABE’s 66th annual meeting. Powell played down a possible 50 basis point (bps) rate cut at either of the central bank’s two remaining policy meetings. Powell said that if the economy performs as expected, two more 25 bps cuts remain in 2024.

The greenback, as measured by the U.S. dollar index ( DXY ), rose 0.15 percent to 100.56, a headwind for the underperforming metal. A light economic record in the US saw the Chicago national activity index, known as the Chicago PMI, improve for the third month in a row but remain in contractionary territory.

Geopolitical tensions remain high after Israel attacked Hezbollah’s headquarters in Lebanon, killing its leader in the attack. While warranting a further rise in gold prices, according to analysts, Bullion has failed to gain traction.

Meanwhile, China’s economy continues to languish, prompting a backlash from the government. The People’s Bank of China (PBoC) is taking further measures to stimulate the economy, which has sparked flows into its soaring stock market.

Daily Market Reasons: Gold Prices Fall as Powell Overshadows Data

• The Chicago Fed’s national activity index, also known as the Chicago PMI, improved for the third month in a row, rising to 46.6 and beating both estimates and August data.
• The latest report on the price index for personal consumption expenditures (PCE) was mixed. Headline inflation in August rose 2.2% from a year earlier, down from 2.5% and slightly below the consensus estimate.
• In contrast, last week’s core PCE rose modestly, as expected, from 2.6% to 2.7% YoY for the same period.
• Market participants raised the odds of a 25 bps rate cut to 56.4%, up from 46.7% in the previous session. The odds of a cut of more than 50 bps are now at 43.6 percent, according to the CME FedWatch tool.

XAU/USD Technical Analysis: Gold price is falling and is hovering around $2,630

After hitting an all-time high of $2,685, gold retreated over 2%, which could extend XAU/USD’s losses towards $2,600. Although near-term momentum favors the bears, with the Relative Strength Index (RSI) aiming lower, gold remains bullish.

Therefore, traders should be aware of this and capitalize on the short-term movement, but they should also be aware that the bulls remain in charge.

Once XAU/USD broke below $2,650, the door opened to test the September 18 daily high at $2,600. Once relinquished, the next support will be the September 18 low of $2,546, followed by the 50-day Simple Moving Average (SMA) at $2,503.

Conversely, if XAU/USD extends its rally above $2,650, the current YTD peak at $2,685 will be exposed, followed by the $2,700 threshold. The $2,750 level is next, followed by $2,800.