XAUUSD is moving in box pattern and market has rebounded from the support area of the pattern
Gold Price Rises as Fed Rate Cut Bets Weigh on USD
Why Gold Is Getting Attention for the Third Day in a Row
So, let’s talk gold. It’s been on an upward trend for three days straight, but not with a whole lot of enthusiasm. What’s going on here? Well, there’s a mix of factors at play, and if you’re into gold trading or just curious about the market dynamics, this is worth a closer look.
Fed Rate Cut Bets and USD Dynamics
The Fed’s Influence on the Market
Firstly, expectations are high that the US Federal Reserve will start cutting rates in September. Fed Chair Jerome Powell has hinted at this, which puts pressure on the US Dollar (USD). When the USD is weaker, gold usually benefits because it becomes cheaper for investors holding other currencies.
Central Bank Buying and Macroeconomic Uncertainties
Adding to this, central banks around the world are still buying gold. Why? Because gold is a classic hedge against economic uncertainty and geopolitical risks. So, even though the price of gold isn’t soaring, these factors are keeping it supported.
The Risk-On Mood and Its Impact
Traders Awaiting the US CPI Report
However, it’s not all smooth sailing for gold. The current “risk-on” mood in the market is putting a bit of a damper on gold’s potential rise. Traders are eagerly waiting for the latest Consumer Price Index (CPI) report from the US. This report is crucial because it gives clues about future Fed actions.
XAUUSD is moving in Ascending channel and market has rebounded from the higher low area of the channel
Why the CPI Report Matters
If the CPI data shows that inflation is under control, it could influence the Fed’s rate cut decisions. This, in turn, affects the USD and, subsequently, the price of gold. So, everyone’s on the edge of their seats waiting for these numbers.
Understanding Market Movers: What’s Pushing Gold?
USD Weakness and Fed Rate Cut Hopes
One of the big drivers for gold right now is the belief that the Fed will cut rates not just in September but also lower borrowing costs again in December. This belief is making the USD less attractive, thereby supporting gold prices.
Jerome Powell’s Comments and Market Sentiment
Jerome Powell has also said that the US economy is on a path to stable prices and that neutral rates might be considered later in 2024. This has led to a more optimistic market sentiment, encouraging investments in riskier assets, which, ironically, caps the upside for gold since it’s seen as a safe-haven asset.
XAUUSD is moving in Ascending channel and market has reached higher high area of the channel
The Role of Inflation Targets
Powell’s commitment to the Fed’s 2% inflation target makes the upcoming CPI data even more important. If inflation is under control, it might hold back traders from betting big on gold. But, if the data shows persistent inflation, gold might get a boost as it suggests more economic uncertainty.
The Crucial US CPI Data
Expected CPI Numbers and Their Implications
The headline CPI is expected to have risen by 0.1% in June, with the yearly rate decelerating from 3.3% to 3.1%. Meanwhile, the Core CPI (excluding Food and Energy prices) is expected to remain sticky at a 3.4% year-over-year rate.
What This Means for the Fed and Gold
These numbers will set the stage for the Fed’s next moves. If inflation is cooling as expected, the Fed might stick to its rate-cutting path, which would weaken the USD further and support gold prices. On the other hand, if inflation remains high, it could delay rate cuts, potentially strengthening the USD and putting pressure on gold.
Final Summary
To sum it all up, gold is in a bit of a tug-of-war. On one side, you’ve got the potential for Fed rate cuts and a weaker USD supporting the price. On the other side, there’s a risk-on market sentiment and upcoming CPI data that could change the game. For now, gold’s path seems to be gently upward, but with so many variables in play, it’s a situation worth watching closely. Whether you’re trading or just following the market, these dynamics will be crucial in determining where gold heads next.
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