Gold prices (XAU/USD) extend gains for the second consecutive day, reaching a two-week peak near the $2,375 mark during Thursday’s European session. The prevailing near-term bias remains tilted in favor of bullish sentiment, propelled by anticipation that major central banks will implement interest rate reductions to stimulate economic growth. Notably, the Bank of Canada (BoC) recently announced its first rate cut in four years, marking a departure from its prolonged stance of maintaining historically high rates, citing concerns about decelerating economic expansion. Furthermore, market forecasts anticipate the European Central Bank (ECB) to initiate its first interest rate cut since March 2016 during its June policy meeting, scheduled for later today.
Concurrently, market sentiment leans towards an increased likelihood of an imminent rate cut by the Federal Reserve (Fed), driven by indications of a slowdown in the US economy. These expectations contribute to the persistent depression of US Treasury bond yields, lingering near their lowest levels in over two months. Despite modest recovery gains in the US Dollar (USD) observed over the past two days, this fails to counteract the upward momentum of Gold, buoyed by ongoing geopolitical tensions in the Middle East, reinforcing its status as a safe-haven asset.
Despite a confluence of supportive factors, the potential for further upside in XAU/USD appears constrained as market participants eagerly await the release of the US Nonfarm Payrolls (NFP) report on Friday, poised to provide critical insights into the health of the US labor market and potentially influencing future monetary policy decisions.
