Gold price (XAU/USD) has remained above the $2,700 mark, setting a new record high. Investors are buying more gold because they expect interest rates around the world to keep dropping. Lower rates make gold more attractive since it doesn’t pay interest, and holding it becomes less costly.
Central Banks Cut Rates, Boosting Gold Over $2,700
Gold prices are climbing as central banks worldwide cut interest rates. On Thursday, the European Central Bank (ECB) reduced its deposit rate by 25 basis points (bps). This is the second time in a row they’ve lowered rates. Experts now believe the ECB is speeding up its rate-cutting process. Originally, they were only expected to cut rates once every three months.
Jim Reid, from Deutsche Bank, said this marks a shift to quicker rate cuts. He mentioned that their team anticipates the ECB will continue with 25 bps rate cuts until the rates reach a range of 2.00% to 2.50%. There’s even a chance of a larger 50 bps cut in December.”
Japan’s Lower Inflation May Stop Rate Hikes
Japan’s inflation dropped recently, making it less likely that the Bank of Japan (BoJ) will increase interest rates. The Consumer Price Index (CPI), excluding fresh food, fell to 2.4% in September, which is below the BoJ’s target of 2.5%. BoJ Governor Kazuo Ueda has said rate hikes depend on data, so this inflation drop could keep rates steady at 0.25%, further increasing gold’s appeal.
Rate Cuts Expected in the UK and Canada
The Bank of England (BoE) is expected to cut rates in November. Earlier, people were unsure, but lower-than-expected inflation data in September has boosted confidence in a rate cut. In Canada, there’s speculation the Bank of Canada (BoC) might cut its policy rate by 50 bps in late October.
These rate cuts, especially in Asia, are pushing gold price higher, making it a preferred choice for investors.
US Data Could Challenge Gold’s Rise
Gold might face challenges due to strong US economic data. This data suggests the Federal Reserve might take a slower approach to lowering interest rates. In September, US retail sales rose by 0.4%, higher than expected. Jobless claims were also lower, indicating a strong job market.
According to the CME FedWatch tool, there’s a 92% chance of a 25 bps rate cut in November. However, if US data stays strong, the Fed might change its approach to future cuts.
Technical Analysis: Gold Holds Above $2,700
Gold has successfully moved above the $2,700 level, suggesting more gains ahead. The next target for traders is $2,750. However, the Relative Strength Index (RSI) is overbought, meaning a pullback could happen. Investors should be cautious about adding to their positions. If the RSI returns to neutral, it might indicate a correction. Key support levels are $2,700 and $2,685, but the overall uptrend for gold is likely to continue.
Gold prices are on the rise as global interest rates drop. For more updates on the gold market, visit Daily Gold Signal. You can also check Daily Gold Update for in-depth insights.
