Gold Price Surges to Record High Amid Rate Cut Expectations
Gold price surged to a record high above $2,550 as US data strengthened expectations of an upcoming Federal Reserve rate cut. Currently, XAU/USD is trading at $2,552, up 1.67% from a daily low of $2,511, according to FXStreet.
US Economic Data Impact
The US Labor Department revealed that Initial Jobless Claims for the week ending September 7 rose as expected, increasing above the previous week’s reading. Additionally, factory inflation exceeded estimates due to higher costs in services.
Following the release of this data, the US Dollar Index (DXY) dropped to a daily low of 101.44, losing 0.29%. Meanwhile, US Treasury yields saw an increase, with the 10-year T-note gaining three and a half basis points (bps) and reaching 3.689%.
Market experts believe that the likelihood of a lower interest rate environment has made gold a more attractive investment option. There are expectations of frequent rate cuts instead of a larger single cut.
Market Expectations and Outlook
According to the CME FedWatch Tool, there is an 85% chance that the Fed will lower rates by 25 basis points, with a 15% chance of a 50 bps cut.
In addition to US data influencing rate cut expectations, the European Central Bank’s decision to lower rates by a quarter of a percentage point has also impacted market sentiment. This move supported a rally on the EUR/USD pair while weighing on the US Dollar’s value.
Upcoming Focus on Consumer Sentiment
Traders will be closely monitoring the Consumer Sentiment survey released by the University of Michigan on Friday to gauge consumer confidence levels.
Overall, the current economic environment and central bank policies are driving movements in the gold price, with expectations of rate cuts shaping market dynamics.
