- Gold prices climbed above $2670 per ounce on Wednesday, hitting another record high, as expectations of further monetary easing and rising geopolitical tensions boosted the appeal of the precious metal.
- Data released on Tuesday showed a larger-than-expected decline in US consumer confidence, strengthening the Federal Reserve's dovish outlook and aligning with previous signals from policymakers regarding another interest rate cut.
- Financial markets are now looking to additional economic data this week for further guidance, including personal consumption expenditure reports, the Federal Reserve's preferred measure of inflation.
- Meanwhile, the People's Bank of China announced its largest stimulus package since 2020 on Tuesday, which includes cutting interest rates.
Additionally, gold's safe-haven status has been strengthened by the increasing violence in the Middle East.
Regarding the factors affecting the gold market, the US Dollar Index (DXY) rose above the 100.7 level on Wednesday, rebounding from a 14-month low of 100.2 touched in the previous session, as financial markets continued to assess the magnitude of interest rate cuts expected from the Federal Reserve in the current easing cycle. The US dollar rose in tandem with long-term Treasury yields, as investors reassessed the risks of persistent inflation that could arise from the Federal Reserve's desire to cut US interest rates and support job growth. Obviously, this was in line with Federal Reserve Governor Bowman's indication that the ongoing upward risks to inflation justify a cautious approach by the US central bank in cutting interest rates after this month's aggressive 50 basis point cut.
Moreover, the US market's inflation gauge will be updated on Friday with the release of the Personal Consumption Expenditures price index, the Federal Reserve's preferred measure of price growth. Meanwhile, the US Dollar Index also received support from the decline in the value of the Japanese Yen, as the Bank of Japan announced that it is in no hurry to continue raising interest rates amid this volatile backdrop.
Furthermore, the yield on the 10-year US Treasury bond extended its recovery. The yield on the 10-year US Treasury bond rose to over 3.8% in late September, extending the recent rally to a three-week high as financial markets continued to assess the magnitude of interest rate cuts that the Federal Reserve will deliver over the next year to normalize monetary policy. Also, the US central bank had delivered a strong 50 basis point interest rate cut to start the easing cycle following its September meeting, citing a slowing Labor market and progress in controlling inflation. However, concerns that the Federal Reserve may prioritize job growth prematurely over sticky inflationary pressures have reduced demand for long-term bonds, extending the recovery in the 10-year Treasury yield from a 16-month low of 3.6% on September 18, leading to an end to the inverted yield curve for the Treasury market.
Federal Reserve Governor Bowman echoed this sentiment, opting for a 25-basis point interest rate cut this month due to risks that could prevent inflation from falling towards its target.
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Gold Price Analysis and Forecast Today:
According to gold analysts, the overall trend for prices remains bullish as long as global geopolitical tensions continue to escalate and as long as global central banks are determined to continue easing monetary policy. After yesterday's gains, eyes are now on breaking a new historical record of $2700 per ounce. For now, all technical indicators are heading towards strong overbought levels. The price of gold will remain on its course until the financial markets react to the comments of US Federal Reserve officials, led by Jerome Powell, as well as the reaction to the US inflation reading preferred by the bank at the end of the week.
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