Created
: 2024.09.13
2024.09.13 18:45
Gold (XAU/USD) is exchanging hands in the high $2,560s on Friday, trading about 0.40% higher on the day after posting new record highs on Thursday when it broke decisively out of a range it had been oscillating in since it peaked on August 20.
The initial catalyst for the breakout was the release of mixed "factory gate" price inflation data, or Producer Price Index (PPI) data out of the US for August. The figures showed a deeper-than-expected slowdown in headline PPI, and although core PPI remained sticky, the market reacted as if the data was disinflationary.
Gold continued to rally during Friday's Asian session due to the revival of the debate over whether the Federal Reserve (Fed) will cut interest rates by 0.50% or 0.25% at its meeting next Wednesday.
The release of still-high core consumer price inflation data, in the form of the Consumer Price Index (CPI) on Wednesday, had seemingly put to bed hopes of a "jumbo" 0.50% (50 pbs) cut. However, an article by a respected The Wall Street Journal (WSJ) Fed Watcher Nick Timiraos, as well as comments from former President of the New York Fed William Dudley, suggested a 0.50% should still be considered. This, in turn, led to a fall in US Treasury yields, a sell-off in the US Dollar (USD), and a rally in Gold's price.
Lower interest rates are positive for Gold because it reduces the opportunity cost of holding the non-interest-bearing asset, making it more attractive to investors.
Gold (XAU/USD) breaks out of its multi-week sideways range and surpasses the previous record highs of $2,531.
The longer-term trend for Gold is bullish, and according to technical analysis theory, since "the trend is your friend," this favors a continuation of the uptrend.
The precious metal has met its previous target at $2,550, generated after the original breakout from the July-August range on August 14, and now sets its sights on the next target at around $2,590.
Gold is overbought, however, according to the Relative Strength Index (RSI). This advises long holders not to add to their positions because of an increased risk of a pullback materializing.
If the RSI exits overbought, it will signal a correction is unfolding. If such a correction unfolds, it will likely find support either at the $2,550 prior target or firmer support lower at the $2,531 former high.
The trend on all timeframes remains bullish, however, suggesting any correction will eventually run out of steam and the broader uptrend will resume, pushing the yellow metal to new highs.
The Producer Price Index released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).
Read more.Last release: Thu Sep 12, 2024 12:30
Frequency: Monthly
Actual: 1.7%
Consensus: 1.8%
Previous: 2.2%
Source: US Bureau of Labor Statistics
Created
: 2024.09.13
Last updated
: 2024.09.13
FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.
We hope you find this article useful. Any comments or suggestions will be greatly appreciated.
We are also looking for writers with extensive experience in forex and crypto to join us.
please contact us at [email protected].
Disclaimer:
All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.
The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.
Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy