- Gold benefited from Fed’s dovish rate cut and hints of flexibility in future policy direction.
- Powell signals rate cuts could adapt to labor market shifts, keeping investors cautious.
- Upcoming UoM Consumer Sentiment report and inflation expectations may further impact gold's momentum.
Gold prices climbed above $2,700 after the Federal Reserve (Fed) decided to lower interest rates and acknowledged that US election effects would not be felt in the near term. At the time of writing, XAU/USD trades at $2704, up more than 1.7%.
Wall Street extended its gain after the Fed reduced the federal funds rate by a quarter of a percentage point on a unanimous decision. In the monetary policy statement, officials recognized the solid economic expansion, although labor market conditions softened. They acknowledged that inflation has moved closer to the Fed’s 2% goal but remains somewhat elevated.
Fed policymakers also noted that the risks of meeting their dual mandate are “roughly balanced” but acknowledged uncertainty in the economic outlook. They will remain vigilant to risks on both sides of the mandate.
In his press conference, Jerome Powell avoided giving specific guidance on future rate moves, leaving room for flexibility at the December meeting and beyond. He emphasized that the Fed could afford to take its time to lower rates due to the strong economy. He acknowledged that policy remains restrictive, even after today’s rate cut, as officials aim to bring rates to neutral levels.
Regarding the pace of rate cuts, Powell mentioned that the Fed could speed up if the labor market weakens or slows down as it nears neutral. However, he clarified that no final decisions have been made yet.
Earlier, the US Bureau of Labor Statistics (BLS) reported an anticipated increase in the number of Americans filing for unemployment benefits compared to the previous week.
Ahead of the week, the US economic schedule will feature the University of Michigan (UoM) Consumer Sentiment for November on Friday, alongside a review of inflation expectations.
Daily Digest Market Movers: Gold price rallies boosted by lower US Real yields
- Gold prices soared sharply as US real yields, which inversely correlate against Bullion, tumbled over eleven basis points, down to 1.95%.
- In the meantime, the US Dollar Index (DXY), which tracks the buck’s performance against six peers, plunges 0.76% to 104.31. Yields, particularly the 10-year benchmark note coupon, fall ten basis points to 4.33%.
- The Bureau of Labor Statistics reported that U.S. Initial Jobless Claims rose from 218K to 221K for the week ending November 2, aligning with expectations.
- Earlier in the week, data indicated a widening trade deficit and a slight slowdown in business activity. S&P Global noted a decline in October's service sector activity, while the ISM Services PMI showed improvement for the same month.
- According to the Chicago Board of Trade's December fed funds rate futures, investors anticipate 49 basis points of Fed rate cuts by the end of the year.
XAU/USD Technical Outlook: Gold price tumbles with sellers eyeing $2,650
Gold rebounded at around the 50-day Simple Moving Average (SMA) at $2,639 and aimed towards $2,700, but buyers lacked the strength to push prices higher. The first key resistance area for bulls would be $2,700. If cleared, the next stop would be the 20-day SMA at $2,716, ahead of $2,750, followed by October 23 high at $2,758.
On the other hand, a drop below the November 6 low of $2,652 could push the yellow metal to challenge $2,639, ahead of testing the October 10 low of $2,603.23. Momentum shifted neutral as the Relative Strength Index (RSI) turned bullish but shows signs of consolidation.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.Last release: Thu Nov 07, 2024 19:00
Frequency: Irregular
Actual: 4.75%
Consensus: 4.75%
Previous: 5%
Source: Federal Reserve
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD drops to two-year lows below 1.0450 after weak PMI data
EUR/USD stays under bearish pressure and trades at its weakest level in nearly two years below 1.0450. The data from Germany and the Eurozone showed that the business activity in the private sector contracted in early November, weighing on the Euro.
GBP/USD falls to six-month lows below 1.2600, eyes on key data releases
GBP/USD extends its losses for the third successive session and trades at a fresh fix-month low below 1.2600. This downside is attributed to the stronger US Dollar (USD) as traders continue to evaluate the Fed's policy outlook following latest data releases and Fedspeak.
Gold price refreshes two-week high, looks to build on momentum beyond $2,700 mark
Gold price hits a fresh two-week top during the first half of the European session on Friday, with bulls now looking to build on the momentum further beyond the $2,700 mark. This marks the fifth successive day of a positive move and is fueled by the global flight to safety amid persistent geopolitical tensions stemming from the intensifying Russia-Ukraine war.
Ripple surges to a new yearly high; XRP bulls aim for three-year high of $1.96
Ripple extends its gains by around 10% on Friday, reaching a new year-to-date high of $1.43 and hitting levels not seen since mid-May 2021. The main reasons behind the rally are the announcement that the US SEC's Chair Gary Gensler will resign and the launch in Europe of an XRP ETP by asset management company WisdomTree.
A new horizon: The economic outlook in a new leadership and policy era
The economic aftershocks of the COVID pandemic, which have dominated the economic landscape over the past few years, are steadily dissipating. These pandemic-induced economic effects are set to be largely supplanted by economic policy changes that are on the horizon in the United States.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.