Gold prices (XAU/USD) attracted buyers for the second consecutive day on Friday, inching closer to the all-time high reached following the Federal Reserve’s substantial interest rate cut earlier this week. The Fed’s indication of potential further rate cuts has kept the U.S. Dollar (USD) under pressure, providing a favorable backdrop for the non-yielding yellow metal.
Concerns surrounding economic slowdowns in the United States and China—two of the world’s largest economies—alongside geopolitical tensions in the Middle East, have further bolstered gold’s appeal. However, a risk-on sentiment prevailing in global equity markets has tempered enthusiasm among gold bulls, limiting fresh investments in the safe-haven asset during the Asian session.
The market’s reaction to the Bank of Japan’s (BoJ) policy update was muted, lacking any significant impact on gold prices. Despite this, XAU/USD appears poised for modest gains for the second week in a row, with the underlying fundamentals suggesting an upward trajectory. Traders are now awaiting a speech from Philadelphia Fed President Patrick Harker for potential market direction.
The Fed’s recent jumbo rate cut and forecast of another 50 basis points reduction by year-end did not enable the USD to capitalize on a post-FOMC recovery from year-to-date lows. Additionally, Fed projections indicate rates could fall to 3.4% in 2025, down from an earlier forecast of 4.1%, and decline further to 2.9% in 2026 from 3.1%, which has rekindled demand for gold.
Interestingly, USD bulls have shown little reaction to positive U.S. macroeconomic data, including a drop in Weekly Initial Jobless Claims to 219,000 for the week ending September 14, marking the lowest level since May and indicating a resilient labor market. Furthermore, the Philadelphia Fed’s survey reported a rebound in the general activity index for manufacturing, rising from a seven-month low of -7.0 in August to 1.7 in September, exceeding consensus expectations.
The Fed’s aggressive rate cut has raised concerns about economic growth, compounded by ongoing fears of a slowdown in China, which has benefited gold prices as a safe haven. Geopolitical tensions from the Middle East and the Russia-Ukraine conflict, coupled with U.S. political uncertainty ahead of the November presidential election, have also supported the metal’s appeal. Additionally, increasing gold purchases by several Asian central banks and Russia, aimed at reducing reliance on the USD, have encouraged bullish sentiment.
From a technical standpoint, the $2,600 level, marking the recent peak, may act as resistance, with further challenges around the $2,613-$2,615 range, representing the upper boundary of a short-term ascending trend channel. Oscillators on the daily chart remain comfortably in positive territory, indicating potential for sustained upward movement. A decisive break above these levels could trigger further bullish momentum.
On the downside, the $2,551-$2,550 area appears to be a protective buffer against immediate declines, followed by the $2,532-$2,530 horizontal support level. A continuation of selling pressure could lead to a drop towards the psychological $2,500 mark, and if breached, gold prices might accelerate towards the $2,476 confluence of the 50-day Simple Moving Average (SMA) and the lower boundary of the trend channel. A convincing break below this support would suggest a near-term top for XAU/USD, potentially setting the stage for a slide towards the 100-day SMA around the $2,412 region, with $2,400 as a further target.
