25/09/24

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Gold prices remain near historic highs of $2,664 as of early Wednesday, navigating a challenging landscape marked by shifting market sentiment. Despite this elevation, the gold market appears to be stalling for further upward momentum due to extremely overbought conditions highlighted on daily charts.

Market confidence received a notable lift during Asian trading, following the People’s Bank of China’s decision to reduce its one-year Medium-term Lending Facility (MLF) rate from 2.30% to 2.0%. This move aims to bolster the nation’s declining economy and is part of a broader set of stimulus measures recently introduced by China.

However, the bullish momentum for gold seems to be muted at present. While the sentiment around China’s stimulus might temper some investor anxiety and stimulate demand—given that China is the leading consumer of gold—the demand for traditional safe havens like gold remains under pressure. Conversely, the rallying of global equities and expectations that the US Federal Reserve may implement a 50 basis points cut in interest rates by November have further complicated gold’s trajectory, exerting downward pressure on the US Dollar and Treasury bond yields.

Recently released economic data has revealed concerning trends, with the Conference Board’s Consumer Confidence Index plummeting to 98.7 from an upwardly revised 105.6 in August, marking a significant dip. The Richmond Fed index also descended to its lowest level in over four years. These indicators have fueled speculation for another significant rate cut by the Federal Reserve.

Looking ahead, while the economic calendar shows a lack of critical US data releases, speeches from Federal Reserve officials are expected to influence market dynamics. The forthcoming remarks by Fed Chair Jerome Powell at a Treasury market conference are particularly anticipated by market participants.

As the gold market operates within these overbought conditions—illustrated by the 14-day Relative Strength Index (RSI) nearing the 80 level —a potential correction could be on the horizon. If buyers manage to push prices above the $2,670 level, this could pave the way for further gains toward $2,700. Conversely, any downturn in prices could test previous support levels, including a low of $2,623, with additional levels lying around $2,600 and $2,585.