The price of gold hits an all-time high as expectations of a Fed rate cut rise

• Gold hits a new all-time high of $2,586 amid rising expectations of a significant Fed rate cut, with a 43% chance of a 50bps cut.
• US Treasury yields fall, US dollar index falls to 101.09, boosting gold’s rise.
• Global ETFs See Strong Inflows; Improved US consumer sentiment and lower inflation expectations are prompting speculation of more Fed easing.

Gold prices rose to a new all-time high (ATH) of $2,586 and are set to extend their gains as the US dollar weakens on Friday. Expectations of a further interest rate cut by the Federal Reserve (Fed) have boosted the non-yielding metal, with talk that it could hit the $3,000 mark. XAU/USD is trading at $2,582 at the time of writing, posting gains of nearly 1%.

According to CME FedWatch Tool data, traders have raised the odds for a 50 basis point (bps) rate cut by the Fed. A news article by Fed watcher Nick Timiraous of The Wall Street Journal, along with comments from former New York Fed President William Dudley, caused a jump from 27% to 43%, while estimates for a cut of 25 bps down from 73% to 57%.

As a result, US Treasury yields fell and undermined the greenback. The U.S. dollar index ( DXY ), which measures the greenback’s performance against six other currencies, fell 0.15 percent to 101.09.

Bullion prices are expected to extend their gains as global gold ETFs posted a fourth consecutive month of inflows in August, based on data from the World Gold Council last week.

The US Economic Program on Friday released the University of Michigan consumer sentiment index for September. This index showed an improvement over August. In addition, inflationary expectations have fallen, fueling speculation for a Fed rate cut.

Daily Market Moves Digest: Gold price surges above $2,550

• The University of Michigan consumer sentiment index rose from 67.9 to 69.0, beating estimates of 68.
• Inflation expectations improved from 2.8% to 2.7% for one year, while longer-term expectations rose from 3% to 3.1%.
• The greenback remained under pressure after the US Bureau of Labor Statistics released mixed PPI data for August. Meanwhile, the number of Americans who filed for unemployment benefits rose as expected, beating the previous week’s reading.
• Data from the Chicago Board of Trade suggests the Fed will cut by at least 98 basis points this year, down from 108 a day earlier, according to the December 2024 federal funds rate futures contract.

Technical outlook: Gold price rises as buyers target $2,600

The uptrend in the gold price remains intact, supported by solid demand and momentum. The Relative Strength Index (RSI) is bullish and due to the strength of the trend remains shy of reaching 80, which traders typically look for as the “most extreme” overbought level.

That said, the XAU/USD path of least resistance is up. The first resistance would be the September 13 peak at $2,586. Once cleared, the next stop would be the $2,600 figure.

Instead, gold sellers need to drive prices below $2,550 if they want to regain control. The next key support levels to remove are the August 20 high at $2,531 before targeting $2,500.