Gold hits all-time high on Fed rate cut expectations

Gold hit a record high of $2,465 on rising expectations that the Federal Reserve will cut interest rates in September.
A potential Trump election victory is increasing market volatility, prompting investors to look into underperforming assets.
Lower-than-expected inflation data and dovish comments from Powell support gold.

Gold surged to a fresh all-time high of $2,465 on Tuesday amid rising bets that the U.S. Federal Reserve (Fed) will begin an easing cycle in September. That, along with rising chances that former President Donald Trump will win the November election, has boosted the yellow metal. XAU/USD is trading at $2,465, up over 1.70%.

Lower-than-expected consumer inflation data last week boosted non-yielding metals amid a dovish Fed turn. The CME FedWatch tool shows a 100% chance of a 25 basis point rate cut in September, with a tiny minority of economists predicting 50 basis points of easing.

In addition, weekend political events featuring former President Trump sponsored a rally in the gold metal. A Trump presidency will aim to raise tariffs and cut taxes, which will likely raise the U.S. budget deficit and create inflationary pressures.

Meanwhile, Federal Reserve Chairman Jerome Powell appeared at the Economic Club of Washington, where he said the economy was doing well and added that the Federal Reserve would lower borrowing costs once it was confident that inflation was approaching its 2% target.

US Census Bureau data reported that retail sales were flat in June, as expected. Excluding autos, however, sales rose sharply, exceeding forecasts.

Daily Market Factors Review: Gold Rises as Traders Ignore Mixed US Data

Weaker-than-expected data on the US Consumer Price Index (CPI) contributed to the rise in gold prices above $2,400, as well as to the increased likelihood of interest rate cuts by the Federal Reserve (Federal Reserve), which was reflected in falling yields on US Treasury bonds.
US retail sales were flat at 0% m/m in June, in line with expectations. Core sales rose 0.4% m/m, above the forecast 0.1%.
Export and import prices fell in June, with export prices falling by -0.5% MoM, below the forecasted -0.1%. Import prices rose from a -0.2% decline in May to 0%, below the estimated 0.2% raise.
Meanwhile, the U.S. Dollar Index (DXY), which tracks the American currency against a basket of six currencies, rose a minuscule 0.02% to 104.27.
The federal funds rate futures contract due December 2024 implies the Fed will ease policy by 53 basis points (bps) by the end of the year, down from 50 bps last Friday.
Bullion prices fell slightly on the back of the People’s Bank of China’s (PBoC) decision to halt gold purchases in June, as it did in May. China held 72.80 million troy ounces of the precious metal at the end of June.

Gold Technical Analysis: XAU/USD Rise Sharply and Extend Rally, with Traders Expecting $2,500

Gold prices remain bullish and are trading at record levels, having broken through the May 20 high of $2,450, which has opened the door for further gains. Momentum remains bullish, as reflected in the Relative Strength Index (RSI), which is aiming higher and is shy of reaching “usual” overbought conditions.

The next resistance for XAU/USD would be $2,475 and then $2,500. Conversely, if gold prices fall below $2,450, the first resistance would be $2,400 and then the July 5 high at $2,392. If it is breached, XAU/USD would still be at $2,350.