Gold prices reached a record high in Asian trade on Wednesday, with spot prices rising 0.2% to an unprecedented $2,478.65 an ounce. Gold futures expiring in August also hit a record high of $2,483.65 an ounce. This significant rise was primarily driven by increased optimism over potential interest rate cuts by the Federal Reserve in September.
Gold Prices Reach Record High of $2,483
The recent surge in gold prices was bolstered by soft consumer price index inflation data and dovish-leaning signals from the Federal Reserve. Traders are now pricing in a more than 90% chance of a 25 basis point cut in September, with a small possibility of a 50 basis point cut. Federal Reserve Chair Jerome Powell indicated growing confidence that inflation is easing, which further fueled expectations of an imminent rate cut.
Muted retail sales data on Tuesday also supported the notion that the U.S. economy is cooling, reinforcing the case for lower interest rates. Lower rates are beneficial for gold and other precious metals as they reduce the opportunity cost of holding non-yielding assets.
Technical Analysis: Gold's Overbought Signals and
Potential Pullback
Despite reaching a record high, gold prices faced some profit-taking due to a slightly overbought Relative Strength Index (RSI) on the daily chart. The risk-on environment, depicted by a bullish trend in global equity markets, also contributed to the pullback in gold prices. However, the overall market sentiment remains positive for gold due to dovish Federal Reserve expectations.
Gold prices are likely to find support near the $2,450 area, with a potential rebound expected if the $2,425 support level holds. Any meaningful slide below this level might prompt further technical selling, potentially dragging gold prices towards the $2,400 mark.
Gold's Performance Amid Rate Cut Bets and Weaker Dollar
The weaker U.S. dollar, which sank to over one-month lows on the prospect of lower interest rates, further supported gold prices. Other precious metals also rose, with platinum futures up 0.1% at $1,016.80 an ounce, and silver futures rising 0.3% to $31.543 an ounce.
Conclusion:
As investors continue to navigate the uncertainties of the economic landscape, gold remains a preferred safe-haven asset. The current market dynamics, driven by dovish Federal Reserve expectations and a weaker dollar, suggest that gold prices might continue to experience upward momentum. However, traders should remain cautious of overbought signals and potential profit-taking, which could lead to temporary pullbacks.
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