Federal Reserve’s Policy and Its Impact have recently surged above $2,450, reaching a new two-week high of $2,462.30. This significant rise is largely due to several key factors influencing the market.
Federal Reserve’s Policy and Its Impact
The recent increase in gold prices can be attributed to the Federal Reserve’s policy and its impact dovish stance on interest rates. On Wednesday, the Fed held rates steady at 5.25% – 5.50% and hinted at potential rate cuts starting in September. This move was anticipated after the Fed’s guidance highlighted cooling inflation and a weaker labor market. Fed Chair Jerome Powell suggested that a rate cut might be considered if inflation and economic conditions align with expectations, as reported by Reuters.
Decline in Bond Yields
Another crucial factor driving gold prices higher is the drop in U.S. 10-year Treasury yields, which fell below 4.0% for the first time in six months. Lower yields reduce the opportunity cost of holding non-yielding assets like gold, making it a more attractive investment during times of economic uncertainty.
Geopolitical Tensions and Market Dynamics
Safe-Haven Appeal of Gold
Geopolitical tensions have also contributed to gold’s rise. Iran has threatened retaliation following the killing of Hamas leader Ismail Haniyeh by an Israeli air strike, raising fears of broader conflict in the Middle East. Investors often turn to gold as a safe-haven asset in response to such geopolitical risks.
U.S. Dollar Volatility and Economic Reports
The U.S. Dollar has shown volatility due to weak U.S. Q2 Unit Labor Costs and the ISM Manufacturing PMI report for July. The U.S. Dollar Index (DXY) is under pressure near 104.40, after recovering from a low of 103.86. The Q2 Unit Labor Costs fell to 0.9%, below expectations of 1.8% and previous data of 3.8%. Additionally, the PMI report indicated a decline in bond yields to 46.8, showing contraction in manufacturing activities.
Key Economic Indicators to Watch
U.S. Nonfarm Payrolls (NFP)
The upcoming U.S. Nonfarm Payrolls (NFP) report will be crucial for future market movements. Economists predict 175K new jobs for July, lower than the previous 206K. The Unemployment Rate is anticipated to hold steady at 4.1%. Investors will also monitor Average Hourly Earnings, projected to grow by 0.3% monthly and show a yearly increase of 3.7%, down from 3.9%.
Technical Analysis: Gold Price Trends
Current Technical Overview
Gold is currently trading within a channel formation on the daily chart, showing a slight upward trend after a period of sideways movement. The 50-day Exponential Moving Average (EMA) around $2,370 provides support for gold prices.
RSI and Price Targets
The 14-day Relative Strength Index (RSI) is approaching 60.00. A rise above this level could indicate further upward momentum. If gold prices break above the all-time high of $2,483.75, it could lead to additional gains. Conversely, the upward-sloping trendline at $2,225 remains a critical long-term support level.
Several factors are driving gold prices above $2,450, including the Federal Reserve’s policy signals, decline in bond yields, and geopolitical tensions. For ongoing updates on gold prices and market trends, visit Daily Gold Signal and explore the Daily Gold Update section.
