- Gold reaches an all-time high of $2,685, driven by China’s economic stimulus and escalating tensions in the Middle East.
- Despite a strong US Dollar, the Fed’s recent 50 basis point rate cut boosts optimism for further gains in the precious metal.
- US economic data points to a “soft landing” scenario, encouraging market optimism for further gold price increases.
On Thursday, gold soared to a new all-time high of $2,685, with prices supported by China’s economic measures and mounting geopolitical concerns in the Middle East. At the time of writing, XAU/USD stands at $2,670 as the US Dollar begins to recover from earlier losses during the Asian and European sessions. Positive sentiment remains, reflected in steady US equity markets, while the 10-year US Treasury yield rose slightly to 3.798%, and the US Dollar Index (DXY) held steady at 100.91.
China’s Stimulus Boosts Gold Prices China’s efforts to stabilize its real estate market have provided significant support to gold. The Politburo has reaffirmed its commitment to economic stability, introducing further fiscal stimulus. The People’s Bank of China (PBoC) also reduced its 7-day reverse repo rate by 20 basis points, from 1.70% to 1.50%. This, combined with last week’s 50 bps rate cut by the Federal Reserve, has pushed gold prices to new highs as central banks worldwide continue to lower borrowing costs. Although the US Dollar remains strong, expectations of more aggressive monetary easing by the Fed are fueling bullish sentiment in the gold market.
The US economy grew strongly in Q2 2024, according to data from the Bureau of Economic Analysis (BEA), while fewer unemployment claims last week reflect a resilient labor market.
Key Market Drivers:
- Ongoing missile strikes between Israel and Hezbollah contribute to the safe-haven appeal of gold.
- US Gross Domestic Product (GDP) for Q2 came in at 3%, surpassing the expected 2.9%.
- US Durable Goods Orders for August remained flat at 0%, beating expectations of a 2.6% decline, though below July’s 9.8% surge.
- Initial jobless claims for the week ending September 21 stood at 218,000, better than the forecast of 225,000.
- Physically-backed gold ETFs saw net inflows of 3 metric tons last week, according to the WGC (World Gold Council.)
- Market participants are fully anticipating at least a 25 bps Fed rate cut, though the odds of a 50 bps cut have fallen to 51.3%, down from 60% the previous day, according to the CME FedWatch Tool.
Gold’s Technical Outlook Gold prices hit a record high of $2,685 on Thursday before retreating slightly, yet momentum remains on the side of buyers. The Relative Strength Index (RSI) indicates that the rally is approaching overbought conditions, nearing extreme levels above 80.
If the XAU/USD pair continues its upward trend past this year’s high of $2,685, the next resistance level would be $2,700, followed by $2,750 and $2,800. On the downside, a drop below $2,650 could lead to a test of the September 18 high at $2,600. Key support levels include the September 18 low of $2,546 and the 50-day Simple Moving Average (SMA) at $2,488
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