In the world of precious metals, early next week presents an optimistic outlook for Gold (XAU/USD). The focus remains on potential upward movement, with initial resistance identified at Friday’s peak of $4,353.56. If the price can break through this level, the next significant target lies at the record high of $4,381.44. A successful breach of this area could reinforce the current breakout structure.
Conversely, the downside risk is anchored by nearby support at the Fibonacci level of $4,192.36. This price point had previously been a pivotal trading range for nearly two weeks before favorable Federal Reserve news spurred the recent bullish extension. Should the price fall below this level, additional support is found at the 50% retracement level of $4,133.95, alongside the significant 50-day moving average positioned at $4,114.24, which would act as a vital support barrier if selling pressure escalates.
The positive momentum for gold this week was largely influenced by the Federal Reserve’s decision to implement a third quarter-point rate cut this year. While this move was anticipated, Federal Reserve officials expressed a cautious approach regarding future cuts, emphasizing the need for clearer data to confirm easing inflation and softness in the labor market. Chicago Fed President Austan Goolsbee reiterated this sentiment, indicating discomfort with the idea of hastening rate cuts, suggesting that they may have acted too swiftly. Despite this cautious tone, market participants are still factoring in the likelihood of two additional rate cuts next year, with the forthcoming U.S. non-farm payrolls report expected to influence short-term expectations.
Adding to the complexity of the market dynamics, a rebound in Treasury yields put pressure on gold prices as trading approached the week’s end. The 10-year Treasury yield experienced a notable increase, reaching 4.188% after a previous decline, while the 30-year yield rose to 4.852%. This rise in yields typically dampens demand for non-yielding assets such as gold.
In the broader economic landscape, the U.S. dollar also showed signs of firmness. The dollar index increased to 98.44, recovering from a two-month low earlier in the week. Nevertheless, despite this rebound, the index is continuing on a path towards a third consecutive weekly decline and is down more than 9% year-to-date. This decline continues to bolster long-term support for gold prices, emphasizing the ongoing tug-of-war between market conditions and investor sentiment in the precious metals market.
