GOLD Analysis
Afternoon: Gold Prices Steady Near Record Highs as US Rate Cut Looms: A Detailed Market Insight
Highlights:
- Markets are pricing in a 62% chance of a 50-bps Fed rate cut, with gold prices hovering near record highs.
- SPDR Gold Trust holdings increased by 0.20% to 872.23 tonnes, reflecting continued strong demand for gold.
- Gold is trading above the 50-period moving average, indicating bullish momentum and potential for further gains.
Overview:
Gold prices remained steady, hovering near record highs, as markets eagerly awaited signals from the Federal Reserve’s anticipated easing cycle. Investors have been pricing in a 62% chance of a 50-basis-point (bps) rate cut during the Federal Reserve’s upcoming two-day meeting, significantly higher than the 43% probability estimated just days earlier. The increased likelihood of an outsized rate cut was fueled by media reports that reignited expectations of more aggressive easing measures from the Fed. A substantial rate cut would make gold more attractive by lowering the opportunity cost of holding non-yielding assets like gold.
Meanwhile, Japan’s central bank is expected to maintain a steady monetary policy, signaling future rate hikes as the economy continues to make progress in stabilizing inflation around its 2% target. In the broader geopolitical landscape, news of an assassination attempt on U.S. presidential candidate Donald Trump added further uncertainty, which typically strengthens demand for safe-haven assets like gold.
SPDR Gold Trust reported a 0.20% increase in holdings to 872.23 tonnes, reflecting growing demand for the precious metal.
Technical Analysis and Key Data
Gold’s technical outlook remains positive on the hourly chart, with prices holding above the 50-period moving average (MA). This MA serves as a strong support zone, reinforcing continued bullish sentiment. As long as gold maintains this position above the 50 MA, the likelihood of further gains is high. Traders may consider taking long positions while placing stop losses just below the 50 MA to mitigate downside risks. The strength in the gold market is further bolstered by a steady increase in demand from institutional investors, evidenced by the growth in SPDR Gold Trust holdings.
Key Economic Data to Watch
The upcoming release of German ZEW Economic Sentiment, along with key U.S. data such as Core Retail Sales, Retail Sales, and the Capacity Utilization Rate, could have a significant impact on market sentiment. Strong economic data from the U.S. could temper expectations for aggressive rate cuts, thereby affecting gold’s short-term trajectory.
Outlook and Strategic Action
The near-term outlook for gold remains bullish, with sustained buying interest pushing prices above critical support levels. Traders should monitor key resistance levels and be prepared to adjust their positions based on the outcome of the Federal Reserve’s decision. The potential for further upside remains high, especially if the Fed signals a more dovish approach, leading to lower interest rates and a weaker dollar, both of which are typically bullish for gold.
Summary:
- Increased Rate Cut Odds: Markets now estimate a 62% chance of a 50-bp rate cut in the upcoming Fed meeting.
- Technical Strength: Gold prices trade above the 50-period moving average, indicating strong buying momentum and potential for further gains.
Support and Resistance Levels:
