Gold price (XAU/USD) returned to the $2,580 range on Thursday after dropping to $2,540. This happened after the U.S. Federal Reserve decided to lower interest rates. On Wednesday, gold reached a new record of $2,600 but quickly dropped after the Fed announced a 50 basis point (0.50%) rate cut, reducing the fed funds rate to 4.75%-5.25%.
Gold Hits a Record High After Fed Meeting
Gold reached a record $2,600 after the Fed’s 50 bps rate cut. However, it couldn’t stay at this level for long. Experts say this happened because the markets already expected the Fed’s decision, so the price didn’t change much. Thomas Mathews, an expert from Capital Economics, noted that “markets barely reacted to the Fed’s 50 bps rate cut,” suggesting further cuts may not cause major price shifts either.
Strong U.S. Economy Limits Gold’s Gains
The Fed’s positive outlook on the U.S. economy helped to limit gold’s rise. The Fed slightly reduced its 2024 GDP forecast to 2.0%, down from 2.1%. This growth is expected to stay steady until 2027. Jim Reid from Deutsche Bank explained that while the 50 bps rate cut happened, there was no sign of more cuts coming, signaling that the U.S. economy remains strong.
Labor Market Concerns and Gold’s Role as a Safe Haven
Even though the Fed raised its unemployment forecast to 4.4% for 2024-2025, the labor market’s current strength has kept gold from becoming a safe haven. Janet Henry, an economist at HSBC, pointed out that jobless claims are still low, and indicators like JOLTS and quits rates remain strong. However, she warned that the labor market might change, and if job numbers fall sharply, another 50 bps cut might be needed.
Technical Analysis: Gold Bouncing Back
After its quick rise to $2,600 and a drop to $2,540, gold is recovering. Technical analysis shows gold is trending upward again, almost 1% higher by Thursday. Following the rule “the trend is your friend,” this suggests gold might see further gains. But there’s still a chance of a deeper correction. Traders should watch for a break above $2,600 to confirm the uptrend.
What’s Next for Gold Prices?
Gold isn’t overbought yet according to the Relative Strength Index (RSI), meaning there’s still room for gains. If gold breaks past $2,600, it could continue rising to $2,650 and then $2,700. However, if gold enters the overbought zone, traders may want to pause long positions and watch for a potential price drop. Key support levels lie at $2,550, $2,544, and $2,530.
Conclusion
Gold prices have been impacted by the Fed’s recent rate cut and strong U.S. economic data. After briefly hitting a new high of $2,600, gold pulled back but is still in a position for possible gains. Traders should keep an eye on key price levels and future labor market data.
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