Gold Gains 0.5% as U.S. PPI Report Looms; Will Fed Rate Cut Boost Prices Further?

Gold prices edged higher on Friday, climbing 0.5% to $2,641.70 per ounce by 0245 GMT, after positive economic data fueled expectations of a Federal Reserve rate cut in the coming month. U.S. gold futures also gained 0.7% to $2,658.90. However, the precious metal is still down around 0.4% for the week after hitting a record high of $2,685.42 last month.

The bullish sentiment is partly driven by Thursday’s report showing U.S. consumer prices rose slightly more than expected in September. Coupled with a surge in weekly jobless claims to 258,000—up from the estimated 230,000—traders are betting on a potential 25-basis-point rate cut by the Fed in November. Currently, there’s an 84.4% probability of a rate reduction, according to CME’s FedWatch tool. Lower interest rates typically make gold a more attractive investment due to reduced opportunity costs.

Technical Analysis: Breakout Above Key Resistance Levels

Gold’s recent move above the $2,635 resistance, reinforced by the 50-day Exponential Moving Average (EMA) and a descending trendline, suggests a shift in momentum. This breakout points to potential further upside in the short term. Immediate resistance stands at $2,652, followed by $2,666 and $2,679, if the bullish momentum continues.

The Relative Strength Index (RSI) has climbed above the critical 50 level, currently at 59.19, indicating increased buying pressure. Additionally, the formation of three consecutive bullish candles on the 4-hour chart—known as the Three White Soldiers pattern—signals strong buying interest and a likely continuation of the uptrend.

Key Technical Levels:

• Immediate Support: $2,634

• Next Support Levels: $2,622 and $2,606

• Immediate Resistance: $2,652

• Next Resistance Levels: $2,666 and $2,679

Today's premium XAU/USD analysis is complete! 📈 Gold bounced off $2,603 with mixed US data. Key resistance at $2,653; if breached, next level is $2,670. Weak jobs data supports rate cut expectations, but hawkish Fed officials may cap gains.#Gold #MarketAnalysis #AI #MZXLiquidity

— MZXLiquidity (@MZXLiquidity) October 10, 2024

Geopolitical Uncertainty Adds to Gold’s Appeal

Beyond technical factors, geopolitical tensions, particularly the recent Israeli strikes in Beirut resulting in 22 casualties, have bolstered gold’s status as a safe-haven asset. Analysts suggest that any further escalation in the Middle East could support gold prices further. This geopolitical risk adds another layer of potential bullishness for gold as investors seek stability amid uncertainty.

Market Outlook: Cautiously Bullish

Overall, the outlook for gold remains cautiously bullish above $2,635. If prices continue to hold above this level, the market could see further gains, especially if the U.S. PPI report due later today reflects weaker-than-expected inflation, reinforcing Fed rate cut expectations. Conversely, a drop below $2,634 might trigger selling pressure, pushing prices back to lower support levels.

With market sentiment leaning towards a Fed rate cut and ongoing geopolitical risks, gold is poised for a potentially volatile yet promising short-term trajectory.