- News outlets reported that a 50 basis point Fed rate cut next week was very difficult.
- Gold traders cheered the likelihood of an easing of aggressive policy.
- The probability of a 50 bps Fed rate cut in September rose to 45%.
Gold price analysis points to a sudden surge in bullish momentum as the yellow metal benefits from increased bets for a massive Fed rate cut. Gold rose to an all-time high after reports the U.S. central bank may be poised to cut rates by 50 basis points.
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On Thursday, news outlets reported that a 50 basis point Fed rate cut next week was very unlikely. At the same time, former Fed policymaker Bill Dudley said there was a strong case for a super-major rate cut. Accordingly, gold traders cheered the likelihood of an easing of aggressive policy. Lower borrowing costs increase the appeal of gold without yield.
The increase in expectations for a Fed rate cut came a day after US consumer inflation showed price pressures rose more than expected. Consequently, investors expected a slow start to policy easing. As a result, the dollar rose, making gold more expensive.
Moreover, wholesale inflation beat forecasts, easing pressure on the Fed to cut interest rates. However, a change late Thursday raised the likelihood of a 50 basis point rate cut to 45%. This creates more uncertainty about the FOMC meeting, as anything can happen. A smaller cut is likely to disappoint investors after a recent surge in betting. Because of this, gold prices could pull back. On the other hand, a 50 basis point rate cut could have little impact on gold if traders have already priced in such an outcome.
Gold key events today
There won’t be any high impact events that cause high volatility in gold. Therefore, traders will hold prices in a more significant rate cut in the US.
Gold Price Technical Analysis: Bullish Momentum Pushes Price Out of Consolidation
On the technical side, gold broke out of consolidation to make new highs. The price has risen above the 30-SMA and is approaching the key level of 2580.46. The bullish bias is strong as the price is well above the SMA and the RSI is in the overbought region.
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Gold was long trapped between support at 2480.38 and resistance at 2520.09. However, the sudden surge in momentum allowed the bulls to continue the previous bull trend. After such a steep move, the price could pull back to the SMA before continuing higher.
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