Gold Attempts to Break Above 50-Day SMA (XAU/USD) experienced a significant rally into the $2,340s on Wednesday. This movement followed Federal Reserve (Fed) Chairman Jerome Powell’s speech on Tuesday, reflecting a shift in the monetary-policy stance. Investors continue to digest his remarks, which are supporting Gold prices.
Gold’s Rally and Investor Interest
Long-term investors are engaging in “bargain hunting,” supporting Gold prices. They are accumulating Gold in anticipation of future rallies, driven by various global factors that favor the precious metal.
Gold Attempts to Break Above 50-Day SMA is attempting to surpass the 50-day Simple Moving Average (SMA), a key resistance level. A bullish close on Wednesday could indicate a fresh upside for Gold.
Fed Chair Powell’s Influence on Gold Prices
Fed Chair Powell’s remarks have reinforced market expectations of a potential rate cut in September. During his speech at the central-banking forum in Sintra, Portugal, Powell mentioned significant progress in combating inflation. This was his first clear acknowledgment that the Fed is nearing its target.
However, Powell emphasized the need for more data to confirm the trend towards the Fed’s 2.0% inflation target before proceeding with rate cuts. He warned of the risks associated with both early and late rate cuts.
Impact of Lower Interest Rates on Gold
Lower interest rates benefit Gold as they decrease the opportunity cost of holding this non-interest-paying asset. Powell’s speech came after the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, showed a decrease to 2.6% in May for both headline and core inflation.
The Fed’s cautious approach followed an inaccurate prediction in Q1 when they expected inflation to fall more rapidly. Markets are now pricing in a 65% probability of a rate cut in or before September, according to the CME FedWatch tool.
Global Factors Supporting Gold Prices
Global factors are also enhancing Gold’s value. Conflicts in the Middle East and Ukraine, along with political shifts in Europe, are driving investors towards the safety of Gold.
In the US, the Supreme Court’s decision regarding former President Donald Trump and concerns over President Joe Biden’s fitness for office have increased the likelihood of a second Trump presidency, potentially destabilizing global security.
he BRICS trading confederation’s growth poses a challenge to the supremacy of the US Dollar. Gold is emerging as a realistic replacement for international trade for countries avoiding Dollar-denominated markets.
Technical Analysis: Gold’s Movement Above 50-Day SMA
Gold is making attempts to pierce the 50-day SMA on an intraday basis. A close above this resistance level could signal a more bullish phase for Gold.
XAU/USD has broken above a trendline connecting the “Head” and “Right Shoulder” of a Head and Shoulders (H&S) pattern, invalidating the bearish connotations. The next target for Gold is $2,369, with further potential to reach $2,388. Alternatively, a break below $2,279 could result in a reversal, targeting $2,171.
Conclusion
Gold’s recent movements indicate potential for further rallies, influenced by Fed policies and global factors. Investors should monitor these developments closely.
For more insights, visit Daily Gold Signal. Explore daily updates at Daily Gold Update.
