Gold Price Hits Record Highs Amid Fed Rate Cut Speculations

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Gold prices extended their gains on Monday, although trading slightly below the record high of $2,450 reached during the Asian session amid growing expectations that major central banks, including the Federal Reserve, could ease policy in 2024. XAU/USD is trading at $2,433, up 0.80% on the day.

The probability of the Fed cutting rates by 25 basis points in September stands at 76%. Investors have begun pricing in two cuts towards the end of the year, which would leave the federal funds rate at 4.75% – 5.00%.

Meanwhile, Federal Reserve (Fed) speakers will dominate the U.S. economic agenda throughout the week, ahead of Wednesday’s release of the Fed’s meeting minutes. On Thursday, initial jobless claims are expected to show a cooling labor market, along with the Chicago Fed National Activity Index.

Gold prices advance despite rising U.S. Treasury yields and a weaker U.S. Dollar. The 10-year U.S. Treasury bond yield is at 4.437%, up one and a half basis points (bps) from its opening level. The DXY gains 0.06% to 104.55.

Last week’s inflation data showed a moderation in core prices. This revived traders’ expectations that the U.S. central bank would resume its easing policy. However, caution is advised as Fed officials were opposed to relying on a single reading indicating moderating inflation.

Technical Analysis: Gold Price Hits $2,450 as Bulls Target $2,500

Gold prices remain poised to test higher levels after reaching a new record high of $2,450, which could open the door to further gains. Momentum supports buyers, as the RSI continues to point upwards but is not yet in overbought territory.

If XAU/USD surpasses the record highs, the next target would be $2,475, followed by $2,500.

Conversely, if XAU/USD falls below $2,400, it could expose the May 13 low at $2,332, followed by the May 8 low at $2,303. Once these levels are breached, the 50-day simple moving average (SMA) at $2,284 will be the next target.