September 20, 2024
New Delhi, India
Gold Prices
The price of gold (XAU/USD) continued to gain traction for the second consecutive day, moving steadily closer to the $2,600 mark, approaching its all-time high during the early European session on Friday. This comes in the wake of the Federal Reserve’s significant rate cut on Wednesday, which included a projection for an additional 50 basis points reduction by year’s end.
Key Drivers Behind the Gold Rally
- Fed’s Interest Rate Cuts: The Fed’s jumbo rate cut, followed by forecasts for further reductions, has pushed down US Treasury bond yields. This, in turn, has weakened the US Dollar (USD), benefiting the non-yielding gold as investors seek alternatives.
- US/China Economic Concerns: Persistent worries about the potential slowdown in the world’s two largest economies – the United States and China – have driven demand for safe-haven assets like gold.
- Geopolitical Tensions: Rising geopolitical risks, particularly in the Middle East and ongoing concerns surrounding the Russia-Ukraine conflict, are further boosting the appeal of gold as a hedge against global instability.
Gold’s Performance Outlook
Despite the prevalent risk-on mood in the markets, which might limit further gains, the backdrop remains favorable for XAU/USD. The commodity seems set to finish the week in positive territory for the second straight week.
Additional Support Factors:
- FOMC Projections: The Fed’s projections suggest rates falling to 3.4% in 2025 and 2.9% in 2026, further weakening the USD and supporting gold prices.
- Strong Labor Market Data: Although US Weekly Initial Jobless Claims hit their lowest since May, and the Philadelphia Fed’s manufacturing index rebounded, the data failed to revive the USD.
- Central Bank Purchases: Asian central banks and Russia continue to buy gold, reducing their reliance on the USD, which adds additional upward momentum to gold prices.
With ongoing concerns over global economic growth, persistent geopolitical risks, and sustained USD weakness, gold remains positioned for further gains in the near term as it approaches the $2,600 mark. Traders should keep an eye on future Fed rate decisions and geopolitical developments for potential shifts in market sentiment.
Disclaimer:
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