Gold price holds above $2,650 as Fed rate cut rates increase

• The gold price settled at $2,660 after hitting a record high of $2,670.
• Traders are giving a 60% chance of another 50 bps of Fed rate cuts in November.
• U.S. Treasury yields and a stronger U.S. dollar capped gold’s gains despite upbeat momentum.

The price of gold held steady above $2,650 for a second straight session on Wednesday, as traders raised the odds of another big interest rate cut by the Federal Reserve (Fed) at its next meeting in November. This and high US Treasury yields prevented XAU/USD from rising further and it mostly traded near $2,660, up 0.14%.

Market sentiment changed slightly during the US session as Wall Street traded in the red. Bullion prices therefore touched a record high of $2,670, but retreated as US Treasury yields rose four and a half basis points (bps) to 3.775%.

Meanwhile, the U.S. dollar index ( DXY ), which tracks the greenback against six other currencies, rebounded from a 14-month low and rose 0.54 percent to 100.88.

During the week, US economic data showed that business activity in the manufacturing sector cooled, while services remained resilient. However, a deterioration in consumer confidence via the Conference Board (CB) suggests that labor market conditions may be worse than forecast.

Last week, the Fed cut borrowing costs by 50 bps to 4.75%-5.00%, and traders appeared confident of consecutive cuts of the same size. According to the CME FedWatch tool, the odds of a 50 bps Fed cut are 60 percent, while 25 bps is 40 percent.

Bullion prices rose 29% in 2024, sponsored by physical demand for gold and major central banks starting their easing cycles. This and geopolitical tensions could keep traders targeting $2,700.

Bullion is up more than 29% so far in 2024, with gains attributed to central bank easing and geopolitical issues.

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

• The price of gold is capped by US Treasury bond yields.
• Middle East tensions between Israel and Hezbollah support gold prices.
• An uneventful US economic program on Wednesday left traders adrift on earlier dates as they prepared for Fed Chairman Jerome Powell’s speech on Thursday.
• ETF flows, geopolitical tensions in the Middle East and China’s massive stimulus measures could push gold prices higher.
• According to the World Gold Council, physical-backed global gold ETFs saw modest net inflows of 3 tonnes last week.

XAU/USD Technical Outlook: Gold Price Consolidates Around $2,650-$2,660

Gold prices are set to extend gains. However, price action turned on Wednesday amid a lack of catalysts, which could push XAU/USD above the current record high of $2,700.

On the momentum side, the Relative Strength Index (RSI) signals that gold is overbought, which could cause a decline before the rally resumes.

If XAU/USD extends its rally beyond the current year-to-date (YTD) peak of $2,670, look for a challenge of $2,675, followed by $2,700. 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.