Gold Price (XAU/USD) trades in the $2,560 range on Friday, marking a 0.40% increase for the day after reaching new record highs on Thursday. The precious metal decisively broke out of a range it had been stuck in since its peak on August 20.
The breakout was triggered by mixed Producer Price Index (PPI) data from the US for August. While headline PPI showed a greater-than-expected slowdown, core PPI remained sticky. Nevertheless, the market perceived the data as disinflationary, fueling Gold’s rise.
Gold Rally Extends Amid Fed Rate Cut Speculation
Gold’s rally extended during Friday’s Asian session as the debate over whether the Federal Reserve (Fed) will cut interest rates by 0.50% or 0.25% resurfaced. Earlier in the week, high core Consumer Price Index (CPI) data seemed to dismiss the possibility of a 50 basis points (bps) rate cut. However, an article by Nick Timiraos, a respected WSJ Fed Watcher, and comments from former New York Fed President William Dudley reignited speculation about a larger cut. This led to a drop in US Treasury yields, a sell-off in the US Dollar (USD), and further gains for Gold.
Lower interest rates typically benefit Gold, as they reduce the opportunity cost of holding this non-yielding asset, making it more attractive to investors.
Technical Analysis: Gold Hits Record Highs as Uptrend Continues
Gold (XAU/USD) surged beyond its multi-week sideways range, surpassing its previous record high of $2,531. The longer-term trend remains bullish, with technical analysis supporting the continuation of this uptrend.
Gold has hit its prior target of $2,550, set after the breakout from its July-August range on August 14. The next target now lies at $2,590. However, the Relative Strength Index (RSI) shows that Gold is overbought, suggesting long holders should be cautious of a potential pullback.
If the RSI exits overbought territory, a correction could be underway. Key support levels to watch include the $2,550 target and the $2,531 former high. Despite potential short-term corrections, the broader uptrend is expected to persist, with Gold likely pushing to new highs.
