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- Gold prices jumped more than 1% after Federal Reserve Chairman Jerome Powell signaled interest rate cuts in the future, expressing confidence that inflation is approaching its 2% target.
- The US Dollar Index (DXY) fell 0.82% to 100.68, as Powell’s comments prompted traders to bet on a 50 basis point rate cut in September.
- The 10-year US Treasury yield fell five basis points to 3.80%, supporting gold’s rally, as the market looks to the August nonfarm payrolls report for further guidance.
Gold price The US dollar rose more than 1% on Friday as US Treasury yields and the US dollar fell after cautious comments from Federal Reserve Federal Reserve Chairman Jerome Powell, who indicated his confidence that inflation is approaching the 2% target and that interest rates should be cut. The gold/US dollar pair is trading at $2,510 after bouncing off daily lows of $2,484.
Gold prices rose sharply after Powell said “it’s time to adjust policy.” He acknowledged that inflation was on track to 2% and expressed that the Fed was shifting toward achieving the maximum employment mandate.
After those remarks, gold regained the $2,500 level, and the dollar extended its losses. US Dollar Index The US Dollar Index (DXY), which measures the greenback’s performance against a basket of six currencies, fell 0.82% to trade at 100.68.
U.S. Treasury yields fell immediately, with the benchmark 10-year Treasury note falling five basis points to 3.80%. Traders increased their bets that the Federal Reserve will cut interest rates by 50 basis points at its September meeting.
The CME FedWatch tool shows that market participants have fully priced in a 25 basis point rate cut, with odds of a larger cut at 36.5%, up from 24% a day earlier.
Now, with the Fed turning to the labor market, the August nonfarm payrolls report will be the final piece of the puzzle to determine the size of the cuts.
Daily Market Movers Summary: Gold Prices Rise Ahead of Next Week’s U.S. Inflation Report
- If the weak US economic data continues, the price of gold will continue to trend upward, which will increase speculation about a significant interest rate cut.
- Following Powell’s speech, other Fed officials made noteworthy comments. Philadelphia Fed President Patrick Harker said the Fed needs to cut interest rates systematically. Chicago Fed President Austin Goolsbee added that monetary policy has now reached its most restrictive level, and that the Fed’s focus is now shifting to fulfilling its employment mandate.
- Next week, the US economic docket will include durable goods orders, the Conference Board consumer confidence index, initial jobless claims for the week ending August 24, and the Federal Reserve’s preferred inflation gauge, the core personal consumption expenditures (PCE) price index.
- In addition, Fed spokespeople, led by Christopher Waller and Atlanta Fed President Raphael Boucek, will hold wire-to-wire talks to prepare the ground ahead of the September meeting.
Technical Outlook: Gold Continues Uptrend as Buyers Target $2,550
The uptrend in gold is still intact and could extend if buyers push prices above the all-time high (ATH) at $2,531. A break of the latter would expose the $2,550 level, followed by the $2,600 level.
On the flip side, if gold makes a daily close below $2,500, it is likely to retest the previous all-time high (ATH) at $2,483. If it is surpassed, the next support for gold will be the May 20 peak at $2,450, followed by the 50-day simple moving average (SMA) at $2,402.
