Gold Analysis Today 27/8: Gold Stable Around Record (Chart)

(MENAFN- Daily Forex)

• The price of Gold rose above $2,525 per ounce at the beginning of trading this week, reaching record levels touched last week after federal Reserve Chairman Jerome Powell reinforced expectations of a cut in US interest rates in September.
• In his speech at Jackson Hole last week, Powell indicated that the Federal Reserve is ready to adjust its policy, with the timing and extent of interest rate cuts depending on future economic data.

Moreover, he noted that labor market risks have increased while inflation risks have decreased. Accordingly, the Federal Open Market Committee (FOMC) is now more confident that price growth is approaching its 2% target, supporting the argument in favor of lowering borrowing costs. Currently, financial markets are divided between expecting a 25-basis point or 50 basis point cut at the Fed's September meeting but pricing in a total of 100 basis points in rate cuts for the rest of the year, which would reduce the opportunity cost of holding non-interest-bearing assets.

In addition, the safe-haven appeal of gold has been boosted by growing concerns about a wider conflict in the Middle East.

As for the factors affecting the gold market, the US dollar index fell to its lowest level in 13 months. According to trading, the US dollar index fell towards 100.5 on Monday, recording its weakest levels since July 2023, as Federal Reserve Chairman Jerome Powell boosted hopes for an interest rate cut in September. Powell said in his speech in Jackson Hole on Friday that it was time to adjust policy amid increasing risks to the labor market, while expressing confidence that inflation would return to the central bank's 2% target. Financial markets are pricing in a higher probability of a 25-basis point rate cut next month, while still seeing a one-third chance of a larger 50 basis point cut.

According to trading, the US dollar fell to its lowest level in 13 months against the euro and to its lowest level in two and a half years against the pound, as Bank of England Governor Andrew Bailey said it was“too early to declare victory” over inflation. Also, the dollar continued to weaken against the yen as Bank of Japan Governor Kazuo Ueda signaled a willingness to raise interest rates further.

Another factor weighing on the gold market, the yield on the 10-year US Treasury note held its recent low below 3.8% on Monday after dovish comments from the Federal Reserve Chairman. Fed Chairman Jerome Powell said in his Jackson Hole speech on Friday that it was time to adjust policy amid rising risks to the labor market, expressing confidence that inflation would return to the central bank's 2% target. Also, the central bank is widely expected to begin easing policy in September but remains divided on the size of its first rate cut.

Meanwhile, traders are pricing in around 100 basis points in total cuts from the Fed's three remaining meetings this year. Now, investors are looking ahead to Thursday's initial jobless claims data for a gauge of the state of the labor market, as well as Friday's July personal consumption expenditures reading Price Forecast and Analysis Today:

There is no change in our technical view of the performance of the gold price , as the general trend is still strongly upward. Technically, the stability above the historical resistance of $2500 per ounce confirms this. At the same time, moves the technical indicators towards strong buying saturation levels. If the US dollar recovers and global geopolitical tensions calm down, the gold price may be exposed to profit-taking sales. Again, we still prefer to buy gold from every downward level

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