Market Analysis

In the midst of wagers on a bigger Fed rate decrease, gold price bulls continue to hold sway close to the all-time high

Amos Simanungkalit · 13 Sep191.6K Views

Gold prices (XAU/USD) are holding onto modest intraday gains as the European session approaches on Friday, currently trading near the $2,565-$2,570 range, which is around its record high. Thursday's softer-than-expected US Producer Price Index (PPI) report provided additional evidence that inflation is easing, increasing expectations for a larger interest rate cut by the Federal Reserve (Fed) next week. This sentiment is further supported by a drop in US Treasury bond yields, which has pushed the US Dollar (USD) to a more than one-week low, acting as a tailwind for the non-yielding metal.

Additionally, persistent geopolitical risks due to the ongoing conflicts in the Middle East and the prolonged Russia-Ukraine war continue to support gold's safe-haven appeal. This validates the overnight breakout from a multi-week trading range, indicating the potential for further near-term gains. However, traders may prefer to remain cautious ahead of next week's central bank meetings, including the Fed's decision on Wednesday, followed by the Bank of England (BoE) and Bank of Japan (BoJ) on Thursday and Friday, respectively.

Technical Outlook: Gold price poised for more upside as it clears key resistance

From a technical standpoint, the recent rise from June’s swing low has formed an ascending channel, signaling a well-established uptrend. Thursday’s close above the $2,525-$2,526 resistance zone, along with the subsequent move beyond the previous all-time high around $2,531-$2,532, provided a fresh bullish signal. With daily chart oscillators remaining in positive territory and not yet overbought, gold appears positioned to test the channel's resistance, just below the $2,600 mark. This level is likely to act as a strong barrier ahead of the FOMC meeting next week.

On the downside, any significant pullback is expected to attract buying interest near the $2,525-$2,530 former resistance area, which should now serve as support. The $2,500 psychological level is another key support zone, likely to act as a base for short-term traders. However, a break below the weekly low of around $2,485 could see XAU/USD drop toward the $2,470 horizontal support, with further losses potentially testing the $2,457-$2,456 region. This area aligns with the lower boundary of the ascending channel and the 50-day Simple Moving Average (SMA), and a decisive break below it could shift the bias in favor of bearish traders.