11/09/24

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Gold prices have reached a new weekly high, primarily driven by a cautious market sentiment that favors this safe-haven asset. The recent dip in the US Dollar has further contributed to a favorable environment for gold, even as traders maintain a conservative approach ahead of the imminent release of the US Consumer Price Index (CPI).

On Wednesday, gold (XAU/USD) experienced continued buying interest, peaking around the $2,520-2,521 level during the Asian trading hours. Despite the rise, the commodity remains within a broader trading range as market participants await crucial inflation data anticipated later in the day. This information is critical as it will heavily impact expectations concerning potential interest rate cuts by the Federal Reserve at the upcoming policy meeting set for September 17-18, thus influencing the future trajectory of gold prices.

As discussions around the Federal Reserve’s impending policy easing intensify, the US Dollar struggles to maintain momentum from its recent gains, thus providing additional support for gold. Market caution prevailing in equity sectors signals a flight towards safer assets like gold. Yet, bullish investors are on the lookout for a breakthrough above the $2,525 resistance before solidifying further positions.

The upcoming CPI report is expected to indicate a modest increase of 0.2% for August, with the yearly rate predicted to slow from 2.9% to 2.6%, which would be the lowest since 2021. Should inflation data reveal a retreat, it could bolster expectations for more aggressive Federal Reserve easing, benefiting gold’s appeal. In contrast, a stronger CPI result may not significantly sway the market, given the consensus on a forthcoming reduction in borrowing costs.

Market forecasts currently suggest a 67% probability of a 25 basis-point rate cut in the next FOMC meeting. In terms of technical analysis, gold must break above the short-term trading range for bulls to regain control, particularly at the $2,525 – 2,526 resistance zone. However, the $2,500 psychological level serves as immediate support, with further downside risks existing at $2,485 and $2,470 if breached. If the $2,450-2,449 area is decisively broken, it could lead to deeper declines towards sub-$2,400 levels, further signaling potential weakening in gold prices.