Gold Breaks $2,670 Amid Chinese Stimulus and Geopolitics

Gold hits an all-time high of $2,685, fueled by China stimulus and tensions in the Middle East.
Despite the mighty US dollar, the Fed’s recent 50 basis point interest rate cut is fueling bullish sentiment for further gains in the bullion market.
Economic data from the US indicate a “soft landing” scenario, maintaining market optimism regarding further growth in gold prices.

Gold hit a up-to-date all-time high of $2,685 on Thursday as the dollar began to recover from earlier losses suffered during the Asian and European sessions. Data from the US present a “soft landing” scenario, while Chinese stimulus and rising tensions in the Middle East have pushed up bullion prices. At the time of writing, the XAU/USD rate is USD 2,670.

The mood remains positive, as reflected in American stocks. US Treasury yields remained flat with the 10-year T-bond yielding 3.798%, up one basis point (bps), while the US dollar, as represented by the US Dollar Index (DXY), remains unchanged at 100.91 .

News from China supports gold’s upward move. The Politburo continues to firmly stabilize the real estate market with more fiscal stimulus after the People’s Bank of China (PBoC) cut 7-day repo rates by 20 basis points, raising rates from 1.70% to 1.50%.

This and last week’s 50 basis point cut in interest rates by the Federal Reserve (Fed) sent the gold bullion to up-to-date record highs as global central banks cut borrowing costs. Although the US dollar remained mighty, expectations that the Fed would begin an “aggressive” monetary easing cycle kept bulls in the trend.

The U.S. economy grew rapidly in the second quarter of 2024, according to the Bureau of Economic Analysis (BEA). Meanwhile, the US Department of Labor revealed that fewer people applied for unemployment benefits last week, a sign that the labor market remains mighty.

Daily Market Change Summary: Gold price remains stable despite high US yields

Rocket attacks between Israel and Hezbollah underpin gold prices.
US gross domestic product (GDP) for the second quarter was 3% in the final reading, beating estimates of 2.9%.
U.S. tough goods orders were unchanged at 0% in August, beating forecasts for a -2.6% contraction, but falling brief of July’s 9.8% gain.
Jobless claims for the week ending September 21 were 218,000, below estimates for an augment of 225,000. and the previous reading of 222 thousand.
Global physically-backed gold ETFs saw modest net inflows of 3 metric tons last week, according to the World Gold Council.
Market participants have fully priced in a Fed rate cut of at least 25 basis points. However, according to the CME FedWatch Tool, the probability of a 50 basis point cut dropped to 51.3%, down from 60% the previous day.

XAU/USD Technical Outlook: Gold price above $2,660

The price of gold hit a record high of $2,685 on Thursday, but has returned to current spot prices. However, momentum favors buyers, although the rally appears to be stalled, as shown by the Relative Strength Index (RSI) climbing further into overbought territory, close to testing extreme levels above 80.

If XAU/USD extends its rally beyond the current year-to-date (YTD) high of $2,685, the next resistance will be $2,700. The next level will be $2,750 and then $2,800.

On the other hand, if XAU/USD falls below $2,650, look for a test of the September 18 intraday high at $2,600. The next key support levels to test will be the September 18 low at $2,546, followed by the 50-day uncomplicated moving average (SMA) at $2,488.