Gold Prices Forecast on Friday: XAU/USD 1% as Fed Cuts Rates; Will Bullion Hold Strong in 2024?

Fed Rate Cut Bolsters Gold’s Appeal

The Federal Reserve’s decision to cut interest rates has significant implications for gold. Lower interest rates typically reduce bond yields and weaken the dollar, enhancing the appeal of gold, which does not offer any yield. Tai Wong, an independent metals trader, noted, “Gold remains in a strong bull market, and no event this week, from the election to the Fed’s decision, is likely to change that.” Wong suggests that unless Fed Chair Jerome Powell hints at a potential pause, gold could continue reclaiming ground from recent dips.

The Fed's expected 25 basis point rate cut today could bring relief to Gold prices, as lower interest rates reduce the opportunity cost of holding non-interest-bearing assets like Gold. Currently, Gold trades near $2,650, below critical 9- and 14-day EMAs. #Xauusd pic.twitter.com/8M7wXtlR6k

— capelloFX (@KapelowFX) November 7, 2024

As traders adjust their expectations, markets are already pricing in another potential 25 basis point rate cut by December. This anticipation aligns with the LSEG data, which indicates a market leaning toward further easing measures. A looser monetary policy could provide gold with further momentum, especially if inflation remains a concern.

Key Points:

• Fed cuts rates by 25 basis points to 4.50%-4.75%.

• Market pricing suggests another potential cut by December.

• Dollar weakness drives up gold’s appeal as a safe-haven asset.

Dollar’s Decline Supports Bullion Demand

The dollar index, a measure of the dollar’s strength against a basket of major currencies, fell 0.6% after reaching a four-month high earlier in the week. A declining dollar boosts the purchasing power of foreign investors for dollar-denominated assets like gold, adding to the metal’s appeal. Independent analyst Michael Hewson observed that potential political shifts, such as former President Donald Trump’s return to power, may complicate future rate cuts due to persistent inflation and higher prices.

Investors now await Powell’s upcoming press conference, where any indications of future rate hikes or pauses will be scrutinized closely. Such cues are expected to influence gold’s trajectory, especially if a sustained dollar weakness continues to underpin bullion demand.

https://twitter.com/KK39072403/status/1854445267195470046

Technical Outlook: Gold Remains Resilient

Technically, gold is trading at $2,694.68 on the 4-hour chart, with immediate resistance near $2,707.08. A bearish trendline around $2,724.95 aligns with the 50 EMA, suggesting a potential cap on further gains. However, should bullish momentum persist, the next resistances could be seen at $2,758.21 and $2,790.43.

On the downside, gold has solid support at $2,676.86, with additional support levels at $2,648.68 and $2,624.86. The RSI near oversold territory at 33.82 hints at a possible recovery, although resistance at the 50 EMA may pose a challenge for the bulls.

Key Insights:

• Immediate Resistance: $2,707.08; Next Resistances: $2,724.95 (50 EMA), $2,758.21.

• Immediate Support: $2,676.86; Next Supports: $2,648.68, $2,624.86.

• RSI near oversold at 33.82 suggests a potential recovery, but strong resistance could limit upward movement.