• Gold prices rose more than 1% after Federal Reserve Chairman Powell hinted at coming interest rate cuts, expressing confidence that inflation would approach its 2% target.
• The U.S. Dollar Index (DXY) fell 0.82% to 100.68 as Powell’s comments prompted traders to bet on a 50 basis point rate cut in September.
• The yield on the 10-year U.S. Treasury note fell five basis points to 3.80%, supporting gold prices as the market looks to August nonfarm payrolls for further guidance.

Gold rose more than 1% on Friday as greenback and U.S. Treasury yields fell following dovish remarks by Federal Reserve Chairman Jerome Powell, who signaled he believes inflation is approaching its 2% target and that interest rates should be cut. XAU/USD is trading at $2,510 after bouncing off intraday lows of $2,484.

Bullion prices rose sharply after Powell said, “The time has come for policy adjustment.” He acknowledged that inflation was headed toward 2% and said the Fed had moved toward achieving its maximum employment mandate.

Following the remarks, gold regained the $2,500 mark, with the Greenback extending its losses. The U.S. Dollar Index (DXY), which measures the greenback’s performance against a basket of six currencies, fell 0.82% to trade at 100.68.

Yields on U.S. Treasury bonds immediately fell, with the 10-year U.S. Treasury note losing five basis points to 3.80%. Traders increased their bets that the Fed would cut rates by 50 basis points at its September meeting.

The CME FedWatch tool shows that market participants have fully priced in a 25 basis point cut, while the chances of a larger magnitude are 36.5%, up from 24% a day earlier.

Now, as the Federal Reserve turns its attention to the labor market, the August nonfarm payrolls report will be the final piece of the puzzle to determine the scale of the cuts.

Daily Market Factors Review: Gold Price Rises Ahead of Next Week’s US Inflation Report

• If US economic data continues to be delicate, the upward trend in gold prices will continue, which would escalate speculation about a significant interest rate cut.
• Following Powell’s speech, other Fed officials made significant comments. Philadelphia Fed President Patrick Harker said the Fed must methodically cut interest rates. Chicago Fed President Austan Goolsbee added that monetary policy is currently at its most restrictive level and the Fed is now focused on delivering on its employment mandate.
• Next week, the U.S. economic calendar includes strong goods orders data, the Conference Board (CB) Consumer Confidence Index, initial jobless claims data for the week ending August 24, and the Fed’s favorite inflation measure, the Core Consumer Expenditures (PCE) Price Index.
• In addition, Federal Reserve speakers led by Christopher Waller and Atlanta Federal Reserve President Raphael Bostic will meet to prepare the groundwork for the September meeting.

Technical Outlook: Gold’s Uptrend Intact, Buyers Expect $2,550

Gold’s uptrend remains intact and could extend if buyers drive prices above the all-time high (ATH) of $2,531. A break above that latter level would expose the $2,550 and then $2,600 line.

On the other hand, if gold reaches a daily close below $2,500, a retest of the previous all-time high (ATH) of $2,483 comes into play. If it is breached, gold’s next support will be the May 20 high at $2,450 and then the 50-day elementary moving average (SMA) at $2,402.