Gold Prices Breaks $2,700 for first the time stays above this level
- Gold price sits at record highs above $2,700, awaits Fedspeak for fresh impetus.
- The US Dollar consolidates weekly gains after riding on a likely Trump victory optimism.
- The daily RSI prods overbought territory but Gold buyers are not ready to give up yet
China’s stimulus optimism and a broad-based US Dollar (USD) pullback have driven the latest uptick in the gold price, which is currently at its greatest level on record, above $2,70o, as of early Friday. The current emphasis is on the Middle East geopolitical updates and Fedspeak in order to provide additional trading momentum.
Fedspeak anticipates that the gold price will be influenced by the ongoing tensions in the Middle
In Asian trades on Friday, the USD is retreating from over two-month highs against its six major rivals as investors take a break following the recent rally, which was fuelled by the market’s optimism that Republican nominee Donald Trump is poised to win the 2024 US presidential elections. Inflationary and advantageous to the Greenback, Trump’s fiscal and trade policies are perceived.
In addition, the mixed Chinese growth and activity data, in conjunction with the People’s Bank of China’s statement, have rekindled stimulus expectations, resulting in a positive shift in risk sentiment in the markets. The Greenback’s allure as a safe-haven currency is also diminished by the renewed market optimism.
Consequently, the gold price is given a double lift, initially from a broad USD retracement and subsequently from the anticipation of additional interest-rate reductions from China. According to Pan Gongsheng, the governor of the Chinese central bank, the reserve requirement ratio (RRR) may be further reduced by 0.25 to 0.5 percentage points by the end of the year, contingent upon market liquidity.
He stated that the interest rate of the 7-day reverse repo operation in the open market will be reduced by 0.2 percentage points, and it is anticipated that the loan market prime rate (LPR) will also decrease by 0.2-0.25 percentage points.
The non-interest-rate bearing Gold price is generally favoured during a low-interest-rate regime
Nevertheless, the European Central Bank (ECB) reduced its key policy rates for the third time this year on Thursday, but it did not offer any forward guidance regarding the rate prognosis. Nevertheless, four sources with knowledge of the situation informed Reuters that a fourth reduction in December is probable, unless economic or inflation data improves in the upcoming weeks.
On Thursday, the Census Bureau of the Commerce Department reported that US Retail Sales increased by 0.4% in September, following an unrevised 0.1% increase in August. The odds of a 25 basis points (bps) rate reduction by the US Federal Reserve (Fed) in November were not altered despite the fact that robust economic prospects were indicated by strong US data. At present, the markets are predicting that the Federal Reserve will implement this action next month, with a 93% likelihood.
Furthermore, the gold price experienced a surge in demand as a safe refuge amid the intensifying geopolitical tensions between Israel and Iran. Following the confirmation of the assassination of Hamas leader Yahya Sinwar by Israel’s Foreign Minister on Thursday, Hezbollah, a militant organization that is sponsored by Iran, declared that it would escalate its conflict with Israel.
All eyes are currently focused on the speeches of numerous Federal Reserve policymakers and the ongoing tensions in the Middle East in anticipation of further increases in the price of gold. The volatility surrounding the gold price may also be influenced by the end-of-week flows.
