Gold prices continued their descent on Thursday, hovering around $2,450 per troy ounce, as expectations of a Federal Reserve interest rate cut in September gained traction. At the latest update, the XAU/USD pair traded at $2,443, marking a 0.20% decline, bolstered by a recovering US Dollar supported by higher US Treasury yields.
The US Bureau of Labor Statistics’ latest report on jobless claims revealed a higher-than-anticipated number of applications, signaling potential economic slowdown. Combined with recent inflation data nearing the Fed’s target, these developments are increasingly drawing attention from policymakers.
Despite an increase in initial jobless claims, the Labor Department noted no significant shift in the overall labor market conditions for the week ending July 13.
Federal Reserve officials have hinted at a possible rate cut, suggesting a closer alignment with their dual mandate objectives. However, the International Monetary Fund (IMF) cautioned against premature rate reductions, recommending the Fed hold off until late 2024.
Gold prices surged to a peak of $2,483 but failed to sustain gains, with profit-taking by investors and a shift towards the US Dollar, fueled by former President Donald Trump’s tariff threats against China, contributing to the pullback.
The US Dollar Index, tracking the greenback against major currencies, rose by 0.43% to 104.18. Concurrently, US Treasury yields climbed across the board, with the 10-year note reaching 4.187%, up more than 2.5 basis points.
In market movements, weaker-than-expected US Consumer Price Index data initially pushed gold prices above $2,400, driven by increased speculation of impending Fed rate cuts and declining Treasury yields.
Looking ahead, gold technical analysis suggests a corrective phase as XAU/USD retreated below $2,460, following an over 8% rally over the past three weeks. While mid-term momentum remains bullish, the Relative Strength Index (RSI) indicates a temporary pause as buyers assess further price action.
Short-term projections for XAU/USD anticipate a potential decline below $2,450, with further support levels at $2,400 and $2,392. Conversely, a breakthrough above $2,490 could propel prices to new highs, potentially reaching $2,500.
This scenario underscores the delicate balance between economic data, Federal Reserve policy expectations, and geopolitical tensions influencing gold’s trajectory in the current market environment.
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