Gold News: Can Prices Hit $2500 on Anticipated Fed Rate Cuts and Middle East Tensions?

Gold Nears Record High

Gold is edging higher on Friday, approaching its record high of $2,483.74 and the significant $2,500.00 level. This movement is fueled by the anticipation of a Federal Reserve rate cut in September and rising geopolitical tensions in the Middle East. Market participants are also closely monitoring the upcoming U.S. nonfarm payrolls data for further direction.

At 10:46 GMT, XAU/USD is trading $2464.56, up $18.18 or +0.74%.

Fed Rate Cut Expectations

Federal Reserve Chair Jerome Powell indicated that interest rates could be reduced as soon as September if the U.S. economy continues on its projected path. This statement has increased trader bets for a 50-basis-point rate cut in September to 28.5%, up from 11.8% earlier in the week, according to the CME Group’s FedWatch tool. Lower interest rates reduce the opportunity cost of holding non-yielding bullion, making gold more attractive.

Geopolitical Tensions Boost Safe-Haven Demand

Gold prices are also benefiting from safe-haven demand amidst geopolitical concerns. The killing of Hamas’ military wing leader, Mohammed Deif, by an Israeli airstrike, and the assassination of the group’s political leader in Tehran, have escalated tensions in the Middle East. Additionally, fears of a retaliatory strike by Iran and its proxies are bolstering gold’s appeal as a hedge against geopolitical and economic risks.

Impact of U.S. Jobs Report

Investors are eagerly awaiting the U.S. payrolls report, due at 12:30 GMT, for further clues on the Fed’s monetary policy path. A weaker-than-expected jobs report could heighten bets for a significant rate cut in September, potentially driving gold prices higher. The report is expected to show an increase of 185,000 nonfarm payrolls, down from June’s gain of 206,000, with the unemployment rate holding steady at 4.1%.

Market Forecast: Bullish Outlook for Gold

Given the rising expectations of a Fed rate cut and ongoing geopolitical tensions, gold prices are poised for further gains. If the U.S. jobs report underperforms and geopolitical risks intensify, gold could breach the $2,500 mark. The year-end target of $2,500 might be reached sooner if these factors persist, supported by strong central bank purchases and renewed demand from ETF investors. The current environment suggests a bullish outlook for gold in the short term.

Technical Analysis

The early upside momentum suggests gold traders are anticipating a bullish jobs report. There target is the record high at $2483.74, followed by the psychological $2500.00 level.

On the downside, support is a pair of 50% levels at $2418.47 and $2380.54. These are followed by the major 50-day moving average support at $2365.42.

If the news is good, I don’t think we’ll have a chance to buy a dip into support so your strategy has to be centered around buying strength. Taking out previous tops is not a potential problem, it’s the follow-through that’s important. Buyers have to be willing to buy a breakout through $2483.74 then be prepared to defend this area.