Gold prices hold steady near record highs, remaining resilient despite the upbeat market sentiment

Gold prices (XAU/USD) are gaining momentum for the second consecutive day on Friday, steadily approaching the $2,600 mark, which is the all-time high, during the early European session. The Federal Reserve's significant interest rate cut on Wednesday, along with a projection for an additional 50 basis points reduction by year-end, has limited the recent recovery in US Treasury bond yields. This dynamic undermines the US Dollar (USD) and benefits the non-yielding yellow metal.

Additionally, ongoing concerns about slowdowns in both the United States and China—the world's two largest economies—along with the risk of escalating geopolitical tensions in the Middle East, are further supporting gold prices. However, the prevailing risk-on sentiment may temper bullish enthusiasm and limit the upside potential for the safe-haven XAU/USD. Still, the commodity is on track to close in the green for the second straight week, with the fundamental backdrop favoring further gains.

Daily Digest Market Movers: Gold Prices Remain Strong Near All-Time High Amid Expectations of Further Fed Rate Cuts in 2024

• The Federal Reserve's significant rate cut on Wednesday and its forecast for an additional 50 basis points reduction in borrowing costs by year-end failed to enable the US Dollar to capitalize on the post-FOMC recovery from its year-to-date low.
• Additionally, Fed policymakers projected that rates will drop to 3.4% in 2025, down from a previous forecast of 4.1%, and to 2.9% in 2026, revised from 3.1%. This outlook has revived demand for gold prices on Thursday.
• USD bulls appear unimpressed by positive US macro data, which showed that weekly Initial Jobless Claims fell to 219K for the week ending September 14, the lowest level since May, indicating a resilient labor market.
• Further, the Philadelphia Fed's survey reported that the general activity index for manufacturing rose from a seven-month low of -7.0 in August to 1.7 in September, exceeding consensus estimates.
• Meanwhile, the Fed's substantial rate cut has raised concerns about economic growth, compounded by ongoing worries about a slowdown in China, which have benefitted the safe-haven XAU/USD.
• Geopolitical risks, particularly tensions in the Middle East and the Russia-Ukraine conflict, also support the precious metal amid US political uncertainty ahead of the November presidential election.
• Moreover, the trend of several Asian central banks and Russia purchasing gold to reduce their reliance on the USD favors bullish traders and enhances the outlook for further near-term gains.

Technical Outlook: Gold Price Bulls May Encounter Resistance Near Ascending Channel Boundary at $2,610-$2,615

From a technical standpoint, the $2,600 mark, representing the all-time high set on Wednesday, could provide some resistance before reaching the $2,613-$2,615 region. This area corresponds to the upper boundary of a short-term ascending trend channel that has been in place since June and is expected to serve as a crucial pivot point. With oscillators on the daily chart remaining comfortably in positive territory and well away from overbought conditions, a sustained move above this barrier could act as a fresh trigger for bulls, paving the way for further near-term gains in gold prices.

Conversely, the $2,551-$2,550 zone appears to offer immediate support, followed by the horizontal resistance level around $2,532-$2,530. Continued selling pressure might expose the psychological $2,500 mark; a drop below this level could accelerate the decline towards the $2,476 area, where the 50-day Simple Moving Average (SMA) and the lower boundary of the channel converge. A convincing break below this support would indicate that the XAU/USD may have peaked in the near term, setting the stage for a potential slide toward the 100-day SMA around the $2,412 region, ultimately aiming for the $2,400 mark.