Gold prices have once again reached $2500/oz amidst a retracement that occurred during the US session on Thursday. The surge in prices can be attributed to various factors, including a stronger US Dollar, rising US Yields, and potential profit-taking in anticipation of Fed Chair Powell’s speech at the Jackson Hole Symposium. Market participants have been eagerly awaiting Powell’s remarks, hoping for confirmation of September rate cuts. However, with the recent downward revision to US jobs data, it is increasingly likely that a rate cut in September is already priced in by the market.
Expectations on September Rate Cuts
The expectations surrounding a September rate cut are reflected in the weakness of the US Dollar and the rise in Gold prices towards the end of last week. Although a number of Fed policymakers have expressed support for rate cuts in September, Gold struggled during the US session, indicating that the market may have already priced in the anticipated rate cut. Therefore, the question arises about the potential impact of Powell’s remarks on the market.
With Powell set to deliver his speech, there is a sense of anticipation and apprehension regarding the market’s response. While there may be volatility due to the presence of other Federal Reserve policymakers on the docket, the direction of the market following Powell’s remarks remains uncertain. The focus will be on any mention of a potential 50 bps cut in September, especially considering the previously favorable market pricing of such a cut. Futures are currently pricing in nearly 100 bps of cuts through 2024, indicating a high level of market expectations.
From a technical standpoint, the rebound in Gold prices during the European session has been significant, with the precious metal surpassing the $2500/oz mark. The recent dip in prices may have provided an opportunity for bulls to reload and for other investors to enter the market at a more favorable price. This could explain the swift recovery in prices leading up to Powell’s speech. Additionally, the key levels for Gold prices are difficult to identify given the asset’s recent ATHs. Immediate resistance levels are seen at 2514 and 2531.66, while support levels are at 2484 and 2472. A move lower could result in a retest of the 2450 support area.
The impact of Fed Chair Powell’s speech on Gold prices remains uncertain, with market expectations for a September rate cut likely already factored into current prices. The technical analysis suggests a strong rebound in Gold prices, but the market reaction to Powell’s remarks will ultimately determine the short-term direction of Gold prices.