Gold price hit an all-time high of $2,570 on Friday, continuing its bullish run following a softer-than-expected US PPI report. The cooling inflation data has strengthened the market’s belief that the Federal Reserve may significantly cut interest rates in September.
The weaker US Dollar and declining Treasury yields have further boosted gold’s appeal, particularly as a non-yielding asset.
On the economic front, the Producer Price Index showed an annual increase of 1.7%, slightly below the forecast, signaling easing inflationary pressures. The report also indicated a marginal increase in core PPI of 2.4%, falling short of expectations. These figures reinforce the idea of a dovish stance from the Fed, which would drive more demand for gold.
In addition to these economic factors, escalating geopolitical tensions in the Middle East and the ongoing Russia-Ukraine conflict are pushing investors toward gold.
Israeli airstrikes on Syria and a large-scale attack on northern Israel by Hezbollah and Hamas have raised fears of a broader regional conflict.
Russia’s threats regarding Ukraine’s missile capabilities also contribute to market uncertainty, increasing gold’s safe-haven demand.
Outlook: Key Events to Watch
With a 40% chance of a 50 basis-point rate cut, according to the CME FedWatch Tool, gold remains poised for further gains. The Michigan US Consumer Sentiment Index and next week’s Federal Reserve meeting will be crucial in shaping market direction.
Investors should also keep an eye on unemployment data and PPI figures, which may offer additional short-term trading opportunities. Gold’s technical indicators suggest a strong upward trend, but a slight correction is possible given the RSI hovering in overbought territory.
Gold Price Forecast – Technical Outlook
Gold (XAU/USD) continues to exhibit strong bullish momentum, characterized by the appearance of three consecutive bullish engulfing candlesticks, often referred to as the “three white soldiers” pattern.
This formation underscores sustained buying pressure and typically signals a potential continuation of the upward trend.
Currently, gold has surpassed several key resistance levels, trading near $2,570. However, it is worth noting that the Relative Strength Index (RSI) has entered overbought territory, sitting at 77.24.
While the market’s bullish sentiment remains in control, the elevated RSI suggests a potential risk of a near-term correction or pullback.
Market participants should closely monitor the $2,575 resistance area. Should gold struggle to breach this level, it could prompt a retracement.
On the downside, the $2,550 and $2,546 zones are likely to provide immediate support during any corrective movements.
Eyes on Fed’s Rate Decision Next Week
Gold prices have held firm this week, supported by investor caution ahead of the University of Michigan (UoM) Consumer Sentiment data, which came in slightly above expectations at 68.3, up from the prior 67.9.
Meanwhile, inflation expectations were reported at 2.8%, reinforcing the market’s belief that inflation is cooling but still present.
While gold typically thrives during periods of high inflation, a softer inflation outlook could reduce its safe-haven appeal. However, with Federal Reserve policymakers set to meet next week, traders remain cautious. The Federal Funds Rate announcement on September 18, along with the FOMC Economic Projections and FOMC Press Conference, will be pivotal.
A more dovish tone from the Fed, particularly if they signal a pause or potential rate cuts in the near future, could reignite gold’s appeal. Lower interest rates tend to weaken the U.S. Dollar, making gold a more attractive asset for investors seeking safety.
Traders are also keeping an eye on inflation projections from the Fed, which could influence future gold movements. Until then, the market is expected to remain volatile as sentiment shifts between U.S. data and upcoming monetary policy signals.
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