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23/08/24
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Gold Resilient Ahead of Powell’s Speech: Market Focus on Interest Rate Outlook
Gold prices have shown resilience following a brief decline, supported by previous resistance levels as market participants await insights from Federal Reserve Chairman Jerome Powell. Insights from Powell’s imminent speech may shed light on the future trajectory of interest rates, a crucial element influencing Gold prices.
On Friday, Gold rebounded, moving past the $2,490 level after a drop to a technical support level of $2,470 in the earlier session. The recovery was bolstered by a weaker US Dollar, which inversely affects Gold, alongside a decline in longer-term US Treasury yields. The expectation of potential interest rate cuts in the future benefits Gold, as it does not yield interest payments, enhancing its appeal as an asset.
The market sentiment remains cautiously optimistic regarding Gold ahead of Powell’s address at the central banker symposium in Jackson Hole. Market analysts anticipate confirmation of expectations that the Federal Reserve may implement interest rate reductions during its upcoming meeting on September 18.
After a sharp decline of over 1% on Thursday, Gold prices rose approximately half a percent. This decline was influenced by an easing probability of a significant interest rate cut in September, which dropped from mid-30% to mid-20% overnight, reflecting recent mixed economic data. Preliminary Purchasing Manager Index (PMI) data showed a modest drop in economic activity, while jobless claims presented a contradictory picture, adding complexity to the economic landscape.
From a technical standpoint, Gold has retraced to the top of its former trading range, providing a base for recovery. The prevailing short-term trend remains bullish; however, should prices fall below the $2,470 level, the outlook could shift negatively. Despite recent fluctuations, Gold remains in a long-term upward trend, indicating sustained underlying strength.
Investors typically favor Gold as a hedge against economic uncertainty and inflation, and central banks increasingly recognize its value by maintaining significant reserves. As geopolitical tensions and market volatility influence demand, Gold’s role as a safe-haven asset continues to be underscored, further solidifying its position in investment portfolios.
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