The gold price (XAU/USD) experiences a notable recovery from its one-month low, reaching a fresh daily peak of $2,622 during the early European session on Thursday. This recovery aligns with the global risk-off sentiment, driven by the Federal Reserve’s (Fed) hawkish stance announced on Wednesday. Additionally, geopolitical tensions and concerns over trade wars further support the safe-haven appeal of gold.
Gold Price Supported by Risk-Off Environment
The Federal Reserve’s decision to slow the pace of interest rate cuts has unsettled financial markets, prompting a shift towards safe-haven assets like gold. Despite the US Dollar (USD) consolidating its previous gains and the rise in US Treasury yields, gold’s intraday climb highlights its enduring appeal amidst market volatility. However, traders remain cautious due to the potential limitations imposed by the strengthening dollar and rising yields.
Key Drivers of Gold Price Recovery
Fed Policy Changes and Market Reaction
The Federal Reserve lowered its benchmark interest rate for the third time since September, signaling a slower pace of future cuts. This move triggered a sharp sell-off in US equity markets, which then influenced Asian markets on Thursday. Consequently, the increased demand for traditional safe-haven assets bolstered gold’s recovery from its recent low.
Hawkish Fed Commentary
Fed Chair Jerome Powell stressed that although inflation has decreased considerably over the past two years, it still surpasses the central bank’s 2% target.
The Fed’s updated projections show the federal funds rate falling to 3.9% by 2025, indicating fewer rate cuts than previously forecasted. This outlook continues to weigh on risk assets, indirectly benefiting gold.
US Treasury Yields and USD Strength
The yield on the benchmark 10-year US Treasury bond reached its highest level since May, sustaining the dollar’s strength. This development capped gold’s upside momentum, as rising yields often make non-yielding assets like gold less attractive. Still, gold managed to climb higher, reflecting strong haven demand.
Technical Analysis of Gold Price Movement
From a technical standpoint, the gold price’s recent close below the 100-day Simple Moving Average (SMA) and the $2,600 mark signaled bearish sentiment. However, Thursday’s rebound brought the price near the $2,618 level, aligning with the 23.6% Fibonacci retracement of its recent decline.
Key Levels to Watch:
- Upside Potential:
- A sustained move above $2,618 could drive the price toward $2,635 (38.2% Fibonacci retracement) and further to $2,655-$2,656 (50% retracement level).
- Downside Risks:
- Immediate support lies near the $2,584-$2,583 range. Below this, the $2,560 level acts as the next critical support. Breaking below the $2,500 psychological level could reveal the 200-day SMA near $2,470.
Upcoming Market Events to Monitor
Traders will closely follow the US economic releases, including the final Q3 GDP figures and Weekly Initial Jobless Claims, for short-term market direction. The Fed’s preferred inflation gauge, the US Personal Consumption Expenditures (PCE) Price Index, set for release on Friday, will provide additional insights into the USD and XAU/USD trends.
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