September 23, 2024
New Delhi, India
Gold prices (XAU/USD) surged to a record high on Monday, driven by a weaker US Dollar (USD) and escalating geopolitical tensions in the Middle East. The recent initiation of a monetary easing cycle by the Federal Reserve (Fed), with expectations of further rate cuts this year, continues to provide strong support to the non-interest-bearing asset.
Key Factors Driving Gold Prices:
- US Dollar Weakness:
The softening of the USD has helped push Gold prices higher, as it becomes cheaper for foreign investors to purchase the precious metal. - Fed Rate Cuts:
The Fed’s decision to cut interest rates by 50 basis points has bolstered Gold’s appeal, particularly as investors seek alternatives to yield-bearing assets. Fed Governor Christopher Waller mentioned that the decision to cut rates was the right call, but future moves will depend on upcoming data. - Geopolitical Tensions:
Heightened tensions in the Middle East have increased demand for safe-haven assets like Gold, as investors move to shield themselves from market volatility.
Risks to the Gold Rally:
- US PMI Data:
Traders are awaiting the release of the US Purchasing Managers Index (PMI) data later today. A stronger-than-expected result could strengthen the USD, potentially capping the upside for USD-denominated Gold. - Fed Policy Outlook:
While the Fed has hinted at further rate cuts, Fed Governor Michelle Bowman emphasized the need to monitor inflation, indicating that the central bank may not rush into more aggressive cuts.
Gold prices remains in positive territory, bolstered by Fed rate cuts and geopolitical risks. However, the outcome of the US PMI data and the USD demand could influence its trajectory in the near term.
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