Gold gets lift as media revives debate over Fed rate cuts

Source Fxstreet
  • Gold is hitting record highs on Friday as markets debate anew whether the Fed will cut by 50 or 25 basis points in September.  
  • The revival of the possibility of a “jumbo” 0.50% cut fuels another rally in Gold. 
  • Gold’s broad uptrend resumes although momentum is flashing “overbought”. 

Gold (XAU/USD) is exchanging hands in the high $2,560s on Friday, trading about 0.40% higher on the day after posting new record highs on Thursday when it broke decisively out of a range it had been oscillating in since it peaked on August 20.

The initial catalyst for the breakout was the release of mixed “factory gate” price inflation data, or Producer Price Index (PPI) data out of the US for August. The figures showed a deeper-than-expected slowdown in headline PPI, and although core PPI remained sticky, the market reacted as if the data was disinflationary. 

Gold extends rally after media reignites debate over 0.50% vs 0.25% Fed cut

Gold continued to rally during Friday’s Asian session due to the revival of the debate over whether the Federal Reserve (Fed) will cut interest rates by 0.50% or 0.25% at its meeting next Wednesday. 

The release of still-high core consumer price inflation data, in the form of the Consumer Price Index (CPI) on Wednesday, had seemingly put to bed hopes of a “jumbo” 0.50% (50 pbs) cut. However, an article by a respected The Wall Street Journal (WSJ) Fed Watcher Nick Timiraos, as well as comments from former President of the New York Fed William Dudley, suggested a 0.50% should still be considered. This, in turn, led to a fall in US Treasury yields, a sell-off in the US Dollar (USD), and a rally in Gold’s price. 

Lower interest rates are positive for Gold because it reduces the opportunity cost of holding the non-interest-bearing asset, making it more attractive to investors.  

Technical Analysis: Gold pushes to record highs as broad uptrend resumes

Gold (XAU/USD) breaks out of its multi-week sideways range and surpasses the previous record highs of $2,531. 

The longer-term trend for Gold is bullish, and according to technical analysis theory, since “the trend is your friend,” this favors a continuation of the uptrend.

XAU/USD 4-hour Chart

The precious metal has met its previous target at $2,550, generated after the original breakout from the July-August range on August 14, and now sets its sights on the next target at around $2,590. 

Gold is overbought, however, according to the Relative Strength Index (RSI). This advises long holders not to add to their positions because of an increased risk of a pullback materializing. 

If the RSI exits overbought, it will signal a correction is unfolding. If such a correction unfolds, it will likely find support either at the $2,550 prior target or firmer support lower at the $2,531 former high. 

The trend on all timeframes remains bullish, however, suggesting any correction will eventually run out of steam and the broader uptrend will resume, pushing the yellow metal to new highs. 

Economic Indicator

Producer Price Index (YoY)

The Producer Price Index released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).

Read more.

Last release: Thu Sep 12, 2024 12:30

Frequency: Monthly

Actual: 1.7%

Consensus: 1.8%

Previous: 2.2%

Source: US Bureau of Labor Statistics

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
October hike odds climb toward 60% as Goldman and BofA both flip — what Warsh's "dose of accommodation" really changedRate futures now price roughly 55% to 62% for a 25bp hike at the October 27-28 FOMC, up from about 30% before Chair Warsh's post-meeting framing that the Fed is merely "removing some accommodation." Goldman Sachs has added an October hike to its forecast and Bank of America now sees moves in both October and December. Here is the repricing, the language behind it, and the two data points that decide it.
Author  Irene Q.
Sep 23, Wed
Rate futures now price roughly 55% to 62% for a 25bp hike at the October 27-28 FOMC, up from about 30% before Chair Warsh's post-meeting framing that the Fed is merely "removing some accommodation." Goldman Sachs has added an October hike to its forecast and Bank of America now sees moves in both October and December. Here is the repricing, the language behind it, and the two data points that decide it.
placeholder
Four jobs reports in five days: what JOLTS, ADP, claims and the September payrolls mean for the October Fed decisionThe US labour market faces its densest data week of the month. JOLTS job openings land Tuesday (7.2 million expected), ADP on Wednesday (70,000 expected), initial claims on Thursday and the September non-farm payrolls on Friday (100,000 expected, down from 162,000). Markets price a 64%-70% chance of another quarter-point Fed hike on October 28. The dollar index sits at 100.77 and the S&P 500 at 7,729.8.
Author  Mitrade
Sep 28, Mon
The US labour market faces its densest data week of the month. JOLTS job openings land Tuesday (7.2 million expected), ADP on Wednesday (70,000 expected), initial claims on Thursday and the September non-farm payrolls on Friday (100,000 expected, down from 162,000). Markets price a 64%-70% chance of another quarter-point Fed hike on October 28. The dollar index sits at 100.77 and the S&P 500 at 7,729.8.
placeholder
Nvidia's $150 billion buyback landed — and the AI sector fell anyway. That's the signal worth tradingNvidia closed up 1.68% at $228.86 on 28 September after announcing a $150 billion share repurchase authorisation, the largest single corporate buyback on record, while the rest of the AI complex sold off: AMD -3.6%, Micron -2.6%, Meta -4.8% and the Philadelphia Semiconductor Index -1.61%. The divergence is not noise. Capital is rotating toward cash-flow certainty, not abandoning the AI theme. With Micron reporting after the close on 30 September, here is what the split means.
Author  Irene Q.
Sep 29, Tue
Nvidia closed up 1.68% at $228.86 on 28 September after announcing a $150 billion share repurchase authorisation, the largest single corporate buyback on record, while the rest of the AI complex sold off: AMD -3.6%, Micron -2.6%, Meta -4.8% and the Philadelphia Semiconductor Index -1.61%. The divergence is not noise. Capital is rotating toward cash-flow certainty, not abandoning the AI theme. With Micron reporting after the close on 30 September, here is what the split means.
placeholder
【Daily Brief】30-year Treasury tops 5.59%, S&P 500 slips to 7,670 and gold holds $4,180 — PCE lands tonightThe 30-year Treasury yield closed at 5.59%, its highest since June 2002, and the Dow fell 131.59 points to 51,349.92. US consumer confidence dropped to 81.9, a 12-year low, and JOLTS job openings fell to 7.1 million. August PCE and Q3 GDP both land at 8:30am ET tonight.
Author  Suzie
Sep 30, Wed
The 30-year Treasury yield closed at 5.59%, its highest since June 2002, and the Dow fell 131.59 points to 51,349.92. US consumer confidence dropped to 81.9, a 12-year low, and JOLTS job openings fell to 7.1 million. August PCE and Q3 GDP both land at 8:30am ET tonight.
placeholder
Gold falls to near $4,150 as higher Treasury yields, oil prices outweigh softer PCE inflationGold price (XAU/USD) tumbles to near $4,150 during the early Asian session on Thursday, pressured by elevated US Treasury bond yields. Traders await the US September employment data for fresh impetus, which will be released later on Friday. 
Author  FXStreet
9 hours ago
Gold price (XAU/USD) tumbles to near $4,150 during the early Asian session on Thursday, pressured by elevated US Treasury bond yields. Traders await the US September employment data for fresh impetus, which will be released later on Friday. 
Related Instrument
goTop
quote