Gold (XAU/USD) Hits $2,431 on Fed Rate Cut Expectations Amid Political Turmoil

Despite the risk-on mood and modest US Dollar strength, the Gold price (XAU/USD) maintained its upward trend and drew further bids around

Written by: Arslan Butt • Tuesday, July 16, 2024 • 2 min read

• Last updated: Tuesday, July 16, 2024

Despite the risk-on mood and modest US Dollar strength, the gold price (XAU/USD) maintained its upward trend and drew further bids around the 2,428.44 level, hitting an intra-day high of 2,431.52.

GOLD Price Chart - Source: Tradingview — GOLD Price Chart – Source: Tradingview

The rally was specifically fueled by market expectations of a greater chance for the start of the rate-cutting cycle in September. Investors seem convinced that the US central bank will begin its rate-cutting cycle in September, and these bets were reaffirmed by the overnight comments from Federal Reserve (Fed) Chair Jerome Powell. This outlook keeps US Treasury bond yields depressed, benefiting the non-yielding yellow metal.

On the flip side, the failed assassination attempt on Donald Trump has increased his chances of winning the 2024 presidential election and raised hopes for fewer regulations. This makes investors more willing to take risks, which could limit the rise of safe-haven assets like gold. Besides, the US Dollar is stronger because people believe Trump’s policies would lead to more government debt and higher inflation, which also helps keep gold prices in check.

US Dollar Gains Amid Political Turmoil and Fed’s Rate Cut Signals

On the US front, the broad-based US dollar gained bullish traction following a failed assassination attempt on leading Republican candidate Donald Trump. However, the gains in the US dollar could be limited as Federal Reserve Chair Jerome Powell stated that recent inflation data shows prices are returning to target levels, which boosts confidence.

Last week, the US Labor Department reported that June’s headline CPI decreased for the first time in over four years, with the yearly rate slowing to 3% from 3.3% in May. Powell indicated that the Fed might not wait until inflation hits 2% before cutting rates, suggesting rate cuts could start soon.

This expectation of imminent rate cuts lends some support to Gold prices. However, the bullish traction of the US dollar could limit significant gains for the commodity, keeping Gold’s upward movement in check.

Gold Price Forecast

Gold (XAU/USD) is trading at $2,426.81, up 0.23% on the day. The 4-hour chart indicates key levels to watch for traders. The pivot point is identified at $2,420.12, suggesting that maintaining this level is crucial for the current bullish momentum.

Immediate resistance is observed at $2,438.60, with further resistance levels at $2,451.64 and $2,464.70. If Gold manages to break through these levels, it could indicate a continued upward trend.

On the downside, immediate support lies at $2,401.85, followed by $2,386.76 and $2,370.24, which could act as buffers against any sharp declines.

The Relative Strength Index (RSI) is currently at 67.04, indicating strong buying interest but nearing overbought territory. The 50-day Exponential Moving Average (EMA) at $2,386.76 underpins the ongoing upward trend, while the 200-day EMA at $2,364.70 provides additional long-term support.

In conclusion, gold is showing a strong bullish trend supported by key technical indicators. Holding above the pivot point of $2,420.12 will be critical for maintaining this upward momentum. Immediate targets on the upside include $2,438.60 and beyond, while keeping an eye on support levels to gauge any potential reversals.

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ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.