Gold News: Dollar Slide and Fed Rate Cuts Support Rally, But Correction Looms

Gold Edges Lower, Weekly Gains Anticipated on Fed Rate-Cut Momentum

Gold prices are retreating slightly on Friday but remain within Thursday’s trading range, signaling indecision among investors as they await more decisive market drivers. Despite Thursday’s rally to a record high of $2,685.64, gold remains susceptible to a near-term correction as it continues to trade significantly above its 50-day moving average of $2,499.04. This moving average has provided solid support since mid-July.

At 12:20 GMT, XAU/USD is trading $2664.86, down $7.58 or -0.28%.

Weekly Gains Driven by Fed Rate-Cut Hopes

Although gold pulled back from its peak, the precious metal is poised for weekly gains, supported by growing expectations of further U.S. interest rate cuts. The Federal Reserve’s recent decision to lower rates by an aggressive 0.5% helped fuel a surge in gold, which has gained 1.8% so far this week. Anticipation for another cut later this year continues to provide strong tailwinds.

Market analysts are increasingly factoring in a 51% chance of another 50-basis-point rate cut in November, according to the CME FedWatch Tool. Such cuts typically lower the opportunity cost of holding non-yielding assets like gold, further reinforcing its appeal. Kyle Rodda of Capital.com emphasized that gold prices are also benefiting from China’s economic stimulus efforts, which have been weakening the dollar.

Dollar Weakness Supports Gold

The dollar has been in a downtrend for four consecutive weeks, amplifying the attractiveness of gold for holders of other currencies. As traders turn their attention to upcoming inflation data, U.S. Treasury yields have remained largely stable. The yield on the benchmark 10-year Treasury is hovering around 3.789%, with little movement ahead of key economic reports.

Focus on Inflation Data and Market Sentiment

Investors are eagerly awaiting the release of the core personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, due later today. Economists are expecting headline PCE to show a 2.3% increase year-over-year and a slight 0.1% uptick from the previous month. Personal income and spending data will be released alongside the PCE figures, which will likely influence market sentiment and future Fed policy.

According to BMI Research, ongoing geopolitical tensions, such as conflict in the Middle East and the upcoming U.S. presidential elections, are additional factors driving gold prices higher. These concerns, combined with expectations of a more accommodative monetary policy, support a bullish outlook for gold in the coming months.

Market Forecast: Bullish Outlook for Gold Prices

Given the ongoing geopolitical risks and the strong likelihood of further U.S. rate cuts, the near-term outlook for gold remains bullish. The dollar’s sustained weakness and market anticipation of dovish monetary policy from the Federal Reserve are expected to push gold prices higher.

While a short-term pullback remains possible due to technical factors, any dips are likely to be viewed as buying opportunities. Gold is expected to continue its upward momentum, potentially testing new record highs in the coming weeks.