The gold price holds gains (XAU/USD) remains steady during the European session on Friday, maintaining its position around the $2,360-$2,365 range. This follows a strong upward movement the previous day, marking a two-week high for the precious metal. Let’s delve into the factors influencing this trend and the outlook for gold prices in the near term.
Economic Data and Rate Cut Expectations
Recent economic data from the US has reinforced expectations of an imminent Federal Reserve rate cut. The softer data has not helped the US Dollar (USD) attract buyers, benefiting gold, a non-yielding asset.
The Bank of England’s (BoE) dovish stance and recent rate cuts by the European Central Bank (ECB) and the Swiss National Bank (SNB) further support a bullish outlook for gold. These factors, combined with a breakout through the 50-day Simple Moving Average (SMA), suggest that gold’s price is poised for more gains.
Market Movers: Gold Price Strength
Gold prices surged to a two-week high following disappointing US economic data. The US Department of Labor reported a slight increase in unemployment insurance claims, while the Commerce Department noted declines in housing starts and building permits. Additionally, the Philadelphia Fed Manufacturing Index dropped, although it remained positive. These indicators, along with tepid retail sales and easing inflation, support the expectation of a September rate cut by the Federal Reserve.
Future Rate Cuts and Market Sentiment
Despite the Fed’s hawkish stance, markets are anticipating another rate cut in December. Federal Reserve officials have commented on the resilience of the US economy and the need for a data-dependent approach. The anticipation of new US Treasury bond supply has pushed yields higher, capping gold’s gains temporarily. Investors are now looking at flash PMI data for more insights into the global economy’s health.
Technical Analysis: Gold Price Outlook
Technically, the gold price closed above the 50-day SMA, signaling potential for further appreciation. The oscillators on the daily chart are gaining positive momentum, indicating that gold could test the $2,378-$2,380 region soon, with a possible move towards the $2,400 mark.
On the downside, the 50-day SMA around $2,345-$2,344 provides immediate support. A break below this level might lead to a drop towards the $2,336-$2,335 region, and further selling could push gold down to the $2,300 mark.
Conclusion
The gold price holds its gains around $2,360, supported by expectations of rate cuts and favorable economic data. With technical indicators suggesting more upside potential, any dips are likely to be seen as buying opportunities.
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