- Gold prices see continued upward momentum on Friday, reaching a new all-time high.
- Increased expectations of a larger Fed rate cut pressure the USD, supporting the precious metal.
- Geopolitical risks also drive safe-haven demand, further boosting XAU/USD.
Gold price (XAU/USD) continues to build on the previous session’s breakout, surging past the $2,525-2,530 resistance zone and hitting a new all-time high during Friday's Asian session. The softer-than-expected US Producer Price Index (PPI) report from Thursday confirmed further easing of inflation, increasing market expectations for a significant rate cut by the Federal Reserve (Fed) in September. This has kept US Treasury yields near their 2024 lows and pushed the US Dollar (USD) to a fresh weekly low, both of which are key drivers fueling demand for the non-yielding yellow metal.
Additionally, ongoing geopolitical tensions, including conflicts in the Middle East and the prolonged Russia-Ukraine war, continue to support demand for gold as a safe-haven asset. Given the current market conditions, the outlook remains bullish for XAU/USD, suggesting further upside potential. However, traders may hold off on making new bets and take a cautious stance ahead of next week’s major central bank events, with the Fed's rate decision on Wednesday and the Bank of Japan's (BoJ) meeting on Friday.
Daily Digest Market Movers: Gold price surges on dovish Fed expectations and Middle East tensions
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Rising expectations for a larger interest rate cut by the Federal Reserve, combined with geopolitical risks, propelled gold to a fresh all-time high on Friday, confirming a bullish breakout from its multi-week trading range.
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On Thursday, the US Bureau of Labor Statistics reported that the annual headline Producer Price Index (PPI) rose by 1.7%, missing estimates of 1.8%. The previous month's reading was also revised down from 2.2% to 2.1%.
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Core PPI, excluding food and energy, registered a 2.4% year-over-year increase, falling short of expectations of 2.5%, indicating further signs of easing inflation in the US.
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Separately, the US Department of Labor (DoL) reported that first-time unemployment claims rose to 230K for the week ending September 7.
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According to the CME Group's FedWatch Tool, the market now prices in over a 40% chance that the Federal Reserve will cut interest rates by 50 basis points after its two-day meeting next Wednesday.
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Heightened geopolitical tensions added to safe-haven demand, as Israel ramped up airstrikes on Iranian-linked targets in Syria
Technical Outlook: Gold price bulls eye short-term ascending channel resistance
From a technical standpoint, the recent upward movement from the June swing low has formed an ascending channel, reinforcing a well-established uptrend. Thursday’s close above the $2,525-2,526 resistance zone, followed by a break beyond the previous all-time high near $2,531-2,532, provided fresh momentum for bullish traders. With daily chart oscillators in positive territory and still shy of overbought levels, gold appears poised for further gains, potentially aiming to test the ascending channel resistance just below the $2,600 mark. This level is likely to serve as a strong hurdle ahead of the upcoming FOMC meeting.
On the downside, any meaningful pullback should attract fresh buyers near the $2,530-2,525 breakout zone, with additional support at the $2,500 psychological level, which now serves as a key base for gold and a pivotal point for short-term traders. However, if selling pressure intensifies and leads to a drop below the weekly low of around $2,485, XAU/USD could slide towards the $2,470 horizontal support. A further decline might target the $2,457-2,456 area, a confluence of the channel’s lower boundary and the 50-day Simple Moving Average (SMA). A decisive break below this level could shift the near-term bias toward bearish traders.
