Gold News: Rate Cut Speculation Sets Stage for Gold Rally—What’s Next?

Gold Prices Rally as Powell Signals September Rate Cut

Gold prices surged following Federal Reserve Chair Jerome Powell’s pivotal speech at the Jackson Hole symposium, with the precious metal gaining 1% and closing the week up 0.17%. Powell’s remarks hinted strongly at an imminent interest rate cut, potentially as soon as September, driving a retreat in both the U.S. dollar and Treasury yields.

Last week, XAU/USD settled at $2512.49, up $4.35 or +0.17%. This was down from the record high of $2531.77.

Powell’s Dovish Stance Boosts Gold

In his address, Powell stated that “the time has come” for the Federal Reserve to cut interest rates, citing inflation’s approach to the 2% target. This explicit endorsement of policy easing sent ripples through the financial markets, with gold emerging as a clear beneficiary.

Market Reaction and Expert Analysis

The dollar index fell against major currencies, while benchmark 10-year Treasury yields declined in response to Powell’s speech. Tai Wong, an independent metals trader in New York, noted, “Asset markets are reacting well, at least initially, to Powell’s general, but somewhat open-ended comment that it’s time for policy to adjust.”

Rate Cut Expectations Drive Gold Outlook

Traders are now pricing in a 67.5% chance of a 25 basis point cut in September, with a 32.5% probability of a more aggressive 50 basis point reduction. Alex Ebkarian, chief operating officer at Allegiance Gold, suggested that expectations of a rate cut could push gold prices to the $2,550-$2,600 range.

Gold’s Performance and Future Prospects

Despite retreating from its all-time high of $2,531.77 earlier in the week, gold has maintained its bullish momentum. The metal’s appeal as a non-yielding asset typically increases in a lower interest rate environment, supporting its upward trajectory.

Market Forecast: Cautiously Bullish

While the outlook for gold remains positive, traders should be prepared for potential volatility. The “buy the rumor, sell the fact” scenario could lead to short-term fluctuations, especially if the September rate decision aligns closely with current market expectations.

However, the broader trend suggests continued support for higher gold prices in the coming months. Factors such as geopolitical tensions, uncertainty surrounding the U.S. presidential elections, and the anticipation of an extended rate-cutting cycle are likely to underpin gold’s performance.

Traders should closely monitor economic indicators and Fed communications for further clues on the pace and extent of monetary policy easing. While the potential for profit-taking exists, particularly following recent highs, the overall sentiment remains bullish for gold as it continues to benefit from its safe-haven status and the prospect of lower interest rates.