Gold price rise (XAU/USD) has seen a 0.25% increase, reaching the $2,360 mark. This surge is due to expectations that the Federal Reserve will begin lowering interest rates by September, despite the strong US ISM Services PMI data released on Wednesday.
Gold Surges as Investors Expect Rate Reductions
Gold price rise rose on Thursday, driven by investor speculation about potential Federal Reserve interest rate cuts. According to the CME FedWatch tool, there is a 69% chance of a rate cut by September, based on 30-day US Fed Fund Futures data. This anticipated reduction in rates benefits Gold since it reduces the cost of holding this non-yielding asset.
Internationally, the outlook on interest rates is also shifting. The Bank of Canada (BoC) recently cut its overnight rate from 5.00% to 4.75%. Similarly, there is widespread anticipation that the European Central Bank (ECB) will reduce its key interest rate by 0.25% to 4.25% in Thursday’s policy meeting. Moreover, after Switzerland’s lower inflation report, speculation has grown that the Swiss National Bank (SNB) may lower its key rate on June 20.
Service Sector Data and Upcoming Nonfarm Payrolls
Wednesday brought a positive boost to the US economic outlook with better-than-expected ISM Services PMI data for May, along with optimism in the tech sector, which strengthened the US Dollar (USD). Investors are now focusing on Friday’s US employment data, particularly the Nonfarm Payrolls (NFP) report, which could influence Gold prices. While predictions suggest a 185K rise in May, recent weak indicators, like the JOLTS Job Openings and lower-than-expected ADP Employment Change, have dampened expectations for the US Bureau of Labor Statistics report. If the NFP report also shows weakness, it could pressure the USD and increase speculation of an early interest rate cut by the Federal Reserve, further supporting Gold prices.
Gold’s Breakout Signals Potential Trend Reversal
Gold’s price has broken through the previous trading range of $2,315 to $2,358, signaling a possible shift in market sentiment. This breakout challenges the short-term downtrend and suggests a potential reversal. With XAU/USD surpassing the upper limit, the next target is $2,385, based on the 0.618 Fibonacci extension from the breakout point upwards. This target gains confirmation with a further advance above $2,375.
XAU/USD 4-Hour Chart Analysis
The initial trendline breach in May set the stage for downward targets, but the recent breakout questions those projections. However, if Gold returns to the previous range and breaks below the $2,315 range low, those targets may come back into play. Technical analysis suggests that the distance covered before a breakout can provide insights into the subsequent move. The initial target for this continuation is $2,303, corresponding to the 0.618 Fibonacci extension of the previous move. A stronger downward push could lead Gold toward support at $2,279. Despite these short-term movements, Gold’s medium- and long-term trends remain bullish, indicating significant recovery potential.
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