The gold price (XAU/USD) has continued its robust recovery, marking a second consecutive day of gains after rebounding from the vicinity of the 50-day Simple Moving Average (SMA), which hovered around the $1,973 area – a three-week low. The momentum has propelled the precious metal to reach a one-week high during the Asian session, approaching the $2,040 supply zone.
The positive trend comes despite the prevailing risk-on environment, traditionally acting as a headwind for safe-haven assets like gold. However, several factors contribute to the bullish sentiment for gold. The Federal Reserve’s (Fed) recent dovish shift, geopolitical risks, and concerns about an economic slowdown in China all favor traders with a bullish outlook and support the potential for further upward movement in the commodity.
The Fed’s communication on Wednesday indicated a halt in interest rate hikes, with the “dot plot” revealing projections for three 25 basis points rate cuts in 2024. Policymakers expressed confidence in inflation approaching the Fed’s 2% target without triggering a recession. This resulted in a significant decline in US Treasury bond yields overnight and intensified selling pressure on the US Dollar (USD). The weakening USD remains a supportive factor for gold, given its non-yielding nature.
Looking ahead, market participants are closely monitoring monetary policy updates from the Swiss National Bank (SNB), the Bank of England (BoE), and the European Central Bank (ECB), anticipating potential volatility in the markets. Additionally, the upcoming US Retail Sales data is expected to provide further direction for gold prices.
