Gold prices drop by over 0.70% on Wednesday as the US Dollar strengthened. This came after Federal Reserve (Fed) Chair Jerome Powell hinted that the central bank might ease its policies due to concerns about a weak labor market. As a result, the XAU/USD fell to $2,504, down from a daily high of $2,529.
Market Overview: US Dollar Gains and Gold Price Decline
Wall Street faced losses ahead of Nvidia’s Q2 2025 earnings report, with the US Dollar reaching a three-day high due to rising US Treasury bond yields. The US Dollar Index (DXY) increased by 0.60% to 101.15. Despite this, gold prices stayed above $2,500, though the rising yield of the US 10-year Treasury note to 3.841% created challenges for the non-yielding metal.
According to sources cited by Reuters, the stronger dollar is putting pressure on gold prices as traders await more economic data to guide the market.
Powell’s Address and Its Impact on the Market
During his Jackson Hole speech, Fed Chair Powell expressed confidence that inflation is moving towards the Fed’s 2% target. This suggests that the Fed may soon lower borrowing costs. This shift indicates that upcoming job market data will be crucial for determining future rate cuts.
Gold prices drop also saw a boost from a slight increase in gold inflows. The World Gold Council reported an additional 8 metric tons ($403 million) of gold last week. Additionally, China’s net gold imports rose by 17% in July, marking the first increase since March.
Upcoming US Economic Data and Gold’s Future Movements
While Wednesday’s economic calendar was light, important data releases are expected on Thursday and Friday. The second estimate of Q2 Gross Domestic Product (GDP) is anticipated to show continued economic growth. Additionally, Initial Jobless Claims for the week ending August 24 will provide insights into the labor market.
On Friday, attention will turn to the core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred measure of inflation. This index is expected to rise slightly.
Speculation on Fed Rate Cuts
Expectations for Fed easing have increased. The December 2024 CBOT fed funds futures contract suggests traders are expecting a 100 basis point rate cut by the end of the year. This has led to speculation of a 50 basis point cut at the Fed’s September meeting, although the odds remain at around 36.5% according to the CME FedWatch Tool.
Technical Analysis: Gold’s Uptrend Holds Steady
Gold’s uptrend remains strong, even with recent losses. If XAU/USD drops below $2,500, the first support level will be $2,483, followed by the $2,450 mark. However, if gold prices stay above $2,500, resistance could be met at $2,531, with potential to rise to $2,550 and $2,600.
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