Gold Analysis: Gains May Not End Soon – 26 August 2024

-- Gold futures surged last Friday after Federal Reserve Chairman Jerome Powell hinted at upcoming interest rate cuts.
-- The precious metal had slowed slightly after recently hitting a new all-time high.
-- The question now is: Is $2600 per ounce the next stop for gold prices?
According to gold trading companies’ platforms, gold futures rose to $2,542.30 an ounce. Overall, gold prices were flat last week, but are still up about 23% since the beginning of the year. In the same performance, silver, gold’s sister commodity, rose above $29 an ounce. Overall, the price of the white metal rose by 1.7% this week and extended its rise since the beginning of the year to more than 23%.

As indicated in a report on Friday, Federal Reserve Chairman Jerome Powell confirmed that “the time has come to adjust policy,” which means that US interest rate cuts are coming. Meanwhile, he did not announce when the initial shift would occur or the size of the cut, investors are pricing in a quarter-point cut next month.

Jerome Powell said, “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, evolving expectations, and the balance of risks,”. Added, “Inflation has fallen substantially. The labor market is no longer overheated, and conditions are now less tight than they were before the pandemic. Supply constraints have normalized. The balance of risks to our two states has shifted.”

Overall, the news sent the US dollar and dollar-linked assets lower. According to forex trading, The US Dollar Index (DXY), a measure of the dollar against a basket of other major currencies, fell below 101.00 after the speech. As is well known, a weaker US dollar is good for dollar-denominated assets because it makes it cheaper for foreign investors to buy.

Another factor affecting the gold market, US Treasury yields fell broadly, with the benchmark 10-year yield sliding to around 3.8%.

With three weeks to go until the next Federal Open Market Committee (FOMC) meeting, investors will be bracing for the August U.S. jobs report in early September. The report could support the case for a 25-basis-point, or 50-basis-point rate cut. While Powell’s remarks provided some clarity to financial markets in the near term, they offered little clue as to how the Fed will proceed after its September meeting. Still, the speech underscored that the U.S. central bank is on the cusp of a major turning point in its two-year battle against inflation.

According to the economic calendar, U.S. job growth is likely to be revised down by 818,000 jobs in the 12 months through March, the largest downward revision since 2009. The Bureau of Labor Statistics reported the much-anticipated figure to at least three Wall Street firms late on its website, renewing questions about the way it publishes some of the world’s most sensitive economic information.

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Gold Price Forecast and Analysis Today:

There is no change in our technical view of gold price performance, as the general trend is upward and will remain upward for a longer period as long as global geopolitical tensions are increasing, in addition to the global central banks' tendency to ease their policy. Technically, stability above the psychological resistance of $2500 per ounce confirms the bulls' control over the trend and at the same time moves some technical indicators towards strong buying saturation levels. In the event that investors accept risks, in addition to the recovery of the US dollar, gold price may be exposed to profit-taking sales. Until that happens, the closest resistance levels currently are $2525, $2538 and $2555 per ounce, respectively.

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Original Source DailyForex.com provides daily fundamental and technical analysis and signals for those looking to trade based on trends in the currency markets.