Gold price increase (XAU/USD) has hit a new high of $2,670 per ounce, following a surprising drop in US consumer confidence on Tuesday. This decline has increased expectations that the Federal Reserve (Fed) will cut interest rates more aggressively.
When interest rates fall, gold becomes more attractive because it doesn’t pay interest. As a result, it’s seen as a safe investment for many.
On the same day, the People’s Bank of China (PBoC) launched a major stimulus plan to support its slowing economy. This included big cuts to borrowing costs, further boosting the demand for gold.
Tensions in the Middle East also contributed to gold’s rise. Ongoing bombings by Israel on Hezbollah targets in Lebanon have made investors turn to gold for safety.
Why Gold Is Surging After US Confidence Drops
Gold price increase is linked to new economic data from the United States. The latest report from the Conference Board shows that consumer confidence in the US has dropped sharply. This news suggests that the Fed may need to cut interest rates even further.
The Consumer Confidence Index fell to 98.7 in September from 105.6 in August. This was much lower than the predicted 103.9. After this data was released, the likelihood of a 50 basis point (0.50%) interest rate cut by the Fed rose to 60%, up from 50%, according to the CME FedWatch tool.
Even with this negative news, Fed Governor Michelle Bowman suggested that a smaller rate cut of 0.25% might be enough to stabilize the economy. Her comments reflected a slightly less aggressive approach to rate cuts.
Technical Analysis: Gold Keeps Rising
Gold continues to rise, reaching new highs on Wednesday. According to technical analysis, the trend suggests more upward movement for gold in the short, medium, and long term.
The next targets for gold prices are $2,700 and $2,750. This will be confirmed if gold breaks above $2,670.
However, traders should be cautious as gold is currently in an overbought zone, according to the Relative Strength Index (RSI). If gold drops out of this zone, it could signal a market correction. In this case, traders might sell their gold positions.
If a correction happens, strong support levels for gold are at $2,600, $2,550, and $2,544, the latter being a key technical level.
Conclusion
Gold’s rise to new highs is driven by falling consumer confidence in the US, stimulus from China, and growing geopolitical tensions in the Middle East. While the upward trend is likely to continue, traders should keep an eye on any signs of a potential correction. For more insights on gold trends, visit Daily Gold Signal, or explore gold trading tips at Daily Gold Signal.
