{"id":90651,"date":"2024-09-17T14:49:16","date_gmt":"2024-09-17T11:49:16","guid":{"rendered":"https:\/\/ironfx-com-php8.wp-dev.int.theitops.net\/?p=90651"},"modified":"2024-09-17T14:49:17","modified_gmt":"2024-09-17T11:49:17","slug":"gold-outlook-price-reaches-new-record-highs","status":"publish","type":"post","link":"https:\/\/www.ironfxcn.com\/id\/gold-outlook-price-reaches-new-record-highs\/","title":{"rendered":"Gold Outlook: Price reaches new record highs"},"content":{"rendered":"

Gold\u2019s price moved higher over the past week<\/a>, reaching a new record-high level. In today\u2019s report, we intend to lay out the main fundamental challenges ahead for the precious metal, including the negative correlation of the USD with gold\u2019s price as well as the upcoming release of the Fed\u2019s interest rate decision tomorrow. We will be concluding this report with a technical analysis of gold\u2019s daily chart.<\/p>\n\n\n\n

USD\u2019s negative correlation with gold continues to be inactive<\/strong><\/h2>\n\n\n\n

The negative correlation of the USD with gold\u2019s price seems to have been in place yet blurred somewhat. The USD remained relatively unchanged in the last week, yet gold\u2019s price got substantial support. On the flip side, on Monday and during today\u2019s Asian session the USD edged lower, while gold\u2019s price failed to benefit from it. <\/p>\n\n\n\n

A factor that may have provided support for Gold\u2019s price may have been the drop of US yields both for short term and long term bonds. It\u2019s characteristic that the drop of US yields started last Thursday while gold\u2019s price started to rise on the same day. <\/p>\n\n\n\n

Hence the negative correlation of US bond yields and gold\u2019s price is in place, given also that the US bonds and gold tend to maintain an antagonistic relationship. Should US yields continue falling, it could ease the attractiveness of US bonds as a safe haven trading instrument and polish the shiny metal\u2019s appeal further, despite being non-interest bearing.\u00a0\u00a0\u00a0\u00a0<\/p>\n\n\n\n

The Fed\u2019s interest rate decision<\/strong><\/h2>\n\n\n\n

In the coming week the main event for Gold\u2019s price may be the release of the Fed\u2019s interest rate decision on Wednesday. The bank is widely expected to cut rates what remains to be seen is to which degree the interest rate is to be reduced. The market seems to be currently pricing in a 50 basis points (bp) rate cut by 67% according to Fed Fund Futures (FFF), while the other 33% implies that a 25 bp rate cut is also sufficient. <\/p>\n\n\n\n

Yet FFF also implies that the market expects further lowering of 75 bp of the Fed\u2019s interest rate by the end of the year. Hence the dovish expectations of the market are intense and imply that not only the width of a possible rate cut by the bank is important, but also the bank\u2019s further intentions. <\/p>\n\n\n\n

Should the bank actually deliver a 50 bp rate cut as expected we may see gold\u2019s price gaining some support, while a 25 bp rate cut would contradict market expectations and could weigh substantially on gold\u2019s price. As for the Fed\u2019s intentions we highlight four elements. <\/p>\n\n\n\n

The first would be the bank\u2019s forward guidance, included in the accompanying statement. Should the document be characterised by a clear cut dovish tone, thus verifying the market\u2019s expectations, we may see gold\u2019s price getting some support and vice versa. <\/p>\n\n\n\n

The second would be the new dot plot, showing the expectations of Fed policymakers about where interest rates are to land by the end of the year, the next year, the year after that and beyond. Should Fed policymakers show that they expect the interest rate to land higher than what the market expects we may see gold\u2019s price falling. <\/p>\n\n\n\n

The third element of interest for market participants, may be the bank\u2019s macroeconomic projections. Should we see a more optimistic outlook for the US economy, supporting the scenario of a soft landing and CPI rates easing further we may see gold\u2019s price edging higher. Last but not least, we highlight Fed Chairman Powell\u2019s press conference half an hour after the release of the Fed\u2019s interest rate decision. <\/p>\n\n\n\n

Should the Fed Chairman maintain a clearcut dovish tone in his press conference we may see gold prices getting some support, while any hesitation contradicting the market\u2019s expectations for extensive rate cuts to come could weigh on gold\u2019s price.\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/p>\n\n\n\n

Upcoming Financial releases<\/strong><\/h2>\n\n\n\n

Besides the today\u2019s US retail sales and industrial output growth rates for August and the Fed\u2019s interest rate decision tomorrow, we may see other financial releases over next days affecting gold\u2019s price. We note\u00a0 on Thursday, the release of the Philly Fed Business index for September. We note that the sister indicator, the New York Fed Manufacturing index for the same month indicated a substantial expansion of economic activity in the wider New York area. <\/p>\n\n\n\n

Should we see\u00a0 the Philly Fed Business index on Thursday, also implying similar expansion of economic activity we may see gold\u2019s price slipping. Another interesting release would the US consumer confidence indicator for September next Tuesday showing a more optimistic outlook on behalf of the average US consumer we may see it weighing on gold\u2019s price.\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0<\/p>\n\n\n\n

Gold Technical Analysis<\/strong><\/h2>\n\n\n\n

XAUUSD Daily Chart<\/strong><\/h3>\n\n\n\n
\"Chart<\/figure>\n\n\n\n