Gold prices increased on Wednesday following Federal Reserve Chair Jerome Powell's speech, which fueled hopes of a future interest rate cut. Powell mentioned that efforts to reduce price pressures have been successful, putting the U.S. on a 'deflationary path.' However, more proof is needed before a rate cut is guaranteed. Markets are optimistic that by September, the Fed might have enough evidence to start cutting rates.
In addition to the monetary policy, several geopolitical factors are providing support for gold prices. Ongoing conflicts in Ukraine and Gaza, along with global election uncertainties, are playing a significant role. Recent political events in France and potential shocks in the UK are also influencing the market.
Sustained central bank gold buying and strong investment demand from Asia continue to underpin the market. These factors have helped gold maintain its hefty gains from 2024, despite the prospect of weaker inflation across developed economies, which could make gold prices more vulnerable.
The gold market has seen a lot of speculative buying over the past two years, driven by its role as an inflation hedge. However, the market remains resilient, with gold prices holding firm despite recent fluctuations. Traders should remain cautious as the market could still face volatility.
Gold has had an impressive run this year, reaching an all-time high of $2,450 in early May. Although progress has slowed, the long-term uptrend from October’s lows remains unthreatened. The near-term trendline from mid-March is now offering support at $2,301.45. A durable slide below this level could see prices drop to the $2,200 region. Despite potential consolidations, the overall trend remains positive, but bulls have more to prove, and deeper falls could still occur.
Gold prices rose as Fed Chair Jerome Powell’s speech hinted at potential rate cuts. Market remains resilient but potential volatility ahead.
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