• The price of gold hit a recent record high above $2,600 on expectations of further interest rate cuts by the Federal Reserve.
• Demand for secure assets is soaring amid rising tensions between Israel and Hezbollah.
• Federal Reserve Governor Waller supports a 50 basis point rate cut; however, Michelle Bowman, a dissenting Federal Reserve member, prefers a smaller cut to avoid declaring a quick victory on inflation.

Gold prices rose above $2,600, hitting recent all-time highs amid growing speculation that the Federal Reserve (Fed) will continue to cut borrowing costs and ratchet up tensions between Israel and Hezbollah in the Middle East. XAU/USD is trading at $2,621, up 1.37%.

Risk aversion is the name of the game, and Wall Street’s three major indexes fell between 0.26% and 0.31%. Federal Reserve Governor Christopher Waller said a 50-basis-point cut was appropriate, citing expectations that August’s PCE reading would be very frail.

Waller added that inflation is weakening faster than expected, which worries him. He also noted that the Fed could take further action if the labor market worsens or inflation data weakens quickly.

Meanwhile, correlations are not playing a massive role, as U.S. Treasury yields are rising in line with gold and the U.S. dollar. The yield on the 10-year U.S. Treasury bond is 3.726%, up 1.5 basis points. The U.S. Dollar Index (DXY), which tracks the U.S. currency against the other six, is up about 0.08% to 100.71.

The meager U.S. economic schedule left Gold’s direction in the hands of additional Fed speakers. Michelle Bowman balked at the 50-basis-point cut. While the policy adjustment was appropriate, she preferred a smaller cut because the risks associated with the decision could be interpreted as a “declaration of victory over inflation.”

Looking ahead to next week, the Fed parade begins with Atlanta Fed’s Raphael Bostic, Chicago Fed’s Austan Goolsbee, and Minnesota Fed’s Neel Kashkari. On the data front, the S&P Global Flash PMI, along with housing data and the Fed’s preferred inflation measure, the Core Personal Consumption Expenditures (PCE) Price Index, will dictate the path of XAU/USD.

Daily Market Factors Review: Gold Price Traders Eye a Tight Schedule for Next Week in the US

• The overall weakening of the US dollar and high tensions in the Middle East contributed to the rise in gold prices.
• Bullion prices rose more than 27% in 2024, the biggest annual enhance since 2010.
• Strong demand for gold from China and India has overshadowed anaemic inflows into gold ETFs.
• The Summary of Economic Projections shows that the Federal Reserve forecasts interest rates will be 4.4% in 2024 and 3.4% in 2025.
• Inflation, as measured by the core consumer price index, is estimated to reach the target of 2% by 2026, with forecasts calling for 2.6% in 2024 and 2.2% in 2025.
• The U.S. economy will likely grow by 2% in 2024, with the unemployment rate expected to rise to 4.4% by the end of the year.
• December 2024 federal funds rate futures suggest the Fed could cut rates by at least 53 basis points, meaning the market is expecting one 25 basis point cut in November and December over its next two meetings this year.

XAU/USD Technical Outlook: Gold Price Hits Record Highs Above $2,600

Gold’s uptrend continues after hitting a recent all-time high (ATH) of $2,625. While all signs point to a rally, the golden metal’s rally appears overextended, leaving the door open for a pullback before recent all-time highs are reached.

Momentum favors buyers. The Relative Strength Index (RSI) is trending higher into bullish territory rather than overbought territory. Therefore, the path of least resistance is tilted upward.

The first resistance for XAU/USD would be $2,650, followed by the psychological $2,700. In the event of a pullback, the first support would be $2,600, followed by the September 18 swing low of $2,546. A break of the latter would expose the August 20 high that turned into support at $2,531, before heading towards the September 6 low of $2,485.