The surge in gold prices continues as the US Federal Reserve remains vigilant about inflation, pushing gold to new highs. Despite low inflation rates and the Fed’s unwavering stance, investors are turning to gold as a safe haven amidst economic uncertainty. This article delves into the driving factors behind the gold rally in the midst of restrained US inflation and its implications for investors seeking to leverage this trend.
Factors Driving the Gold Rally:
Gold prices have surpassed $2,330 as traders anticipate Fed rate cuts later this year.
Increased risk aversion due to political turmoil in Europe has fueled demand for safe-haven assets like gold.
US Consumer Sentiment declined in June, while inflation expectations remain above the Fed’s 2% target.
XAU/USD is supported by the decline in the 10-year US Treasury yield.
Market Movement and Analysis:
Gold prices surged in the North American session following US inflation data that raised hopes of Fed rate cuts. Additionally, political uncertainty in Europe led to a flight to safety, boosting gold prices.
XAU/USD is currently trading at $2,333, up over 1.30% from daily lows. Despite negative sentiment, US equities showed some recovery towards the end of the trading session.
Recent data indicates a deterioration in US Consumer Sentiment in June, with inflation expectations above the Fed’s target. Traders are betting on the Fed cutting rates multiple times this year.
The 10-year US Treasury yield dropped, providing support for gold prices, despite China pausing its gold buying spree.
Market Movers and Technical Analysis:
The US Dollar Index rose, impacting gold prices, while the University of Michigan Consumer Sentiment Index declined in June.
Fed Chair Jerome Powell expressed caution about inflation and readiness to respond to weakening job numbers.
Technical analysis suggests a downward bias for gold prices, with potential support levels at $2,300, $2,277, and $2,222.
The article also provides insights into the Federal Reserve’s monetary policy, including interest rate adjustments, policy meetings, and unconventional measures like Quantitative Easing (QE) and Quantitative Tightening (QT).
Disclaimer: The content includes forward-looking statements and is for informational purposes only. It is essential to conduct thorough research before making investment decisions. The author’s views do not necessarily reflect those of FXStreet or its advertisers. The author is not liable for information accessed through external links. The article does not constitute personalized investment advice.
