Are Gold Prices Set to Sparkle with the Fed’s Rate Cuts?

The price of gold rose by more than one percent on Wednesday. Prices rose near two-week highs after weaker-than-expected US economic data fueled predictions that the Federal Reserve could cut interest rates by September. Meanwhile, the FOMC meeting minutes indicated that “several participants” are prepared to raise interest rates if inflation remains high.

The minutes of the Fed showed that most participants rated current policy restrictive but opened the door to raising interest rates. Policymakers have acknowledged that the economy is cooling and could react to unexpected economic weakness.

In addition, US business activity in the services sector contracted after hitting its highest level since August 2023, according to the Institute for Supply Management. This and weaker jobs data, as the number of Americans filing for unemployment benefits rose and private companies hired fewer workers than foreseen, sparked a repricing of Fed interest rate cuts.

Labor market data surprisingly came in softer following Tuesday’s stronger-than-expected JOLTS report. Trader focus shifts to Friday’s Nonfarm Payrolls (NFP) report as US markets will be closed on Thursday due to Independence Day.

On Tuesday, Powell remarked that the disinflation process has resumed but emphasized the need for further progress before considering any interest rate cuts. He added, “Because the US economy is strong and the labor market is strong, we have the ability to take our time and get this right.”

US jobs data for June, led by the ADP Employment Change, came in at 150K, missing estimates of 160K and down from May’s 157K.

US Initial Jobless Claims for the week ending June 29 rose to 238K, surpassing estimates of 235K and the previous reading of 234K.

June’s ISM Services PMI dropped sharply to 48.8, its lowest since May 2020 and the fastest decline in four years, signaling recessionary conditions.

Now, Focus will shift on Nonfarm Payroll data, scheduled to release on Friday.

Technical Outlook : Gold Futures

Gold prices sparked to a two-week high 72573 yesterday and settled at 72403 compared to previous day’s close of 71554.00.

On the above chart, prices trading on a verge of a bullish breakout. This is further confirmed by momentum as the Relative Strength Index (RSI) is bullish.

 A break above 72950 will open the door for bullish rally towards 73500-74000.00.  Else, prices may consolidate in between the range of 72500-71500.

On the downside, crucial support is at 71450 below it 70700-70500.

Happy Trading!

Commodity Samachar
Learn and Trade with Ease

Also Read : Nifty & Bank Nifty: Will They Break Out or Break Down Next? Forex Newsletter : Dollar Index, XAUUSD, Copper, Crude Oil

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