Gold prices surged on Thursday following the Federal Reserve’s decision to initiate an easing cycle with a 50-basis-point (bps) rate cut. Despite an uptick in US Treasury yields, which typically exert downward pressure on non-yielding assets like gold, the precious metal is on track to reclaim the $2,600 mark. As of this writing, XAU/USD is trading at $2,589, reflecting an increase of over 1%.
Following the Fed‘s announcement, gold extended its gains, recovering from losses incurred on Wednesday. The central bank opted for the more significant of two anticipated cuts, citing a sustainable trajectory towards its 2% inflation target. Fed Chair Jerome Powell emphasized the Fed’s ability to support labor market strength through policy adjustments.
Powell noted a reduction in inflation risks, alongside improvements in the labor market. He indicated that if inflation remains persistent, the Fed could adopt a more gradual approach to policy normalization, stressing that there is “no rush” to adjust current policies.
Attention is now shifting to US jobs data in the wake of Powell’s remarks at Jackson Hole, where he focused on achieving maximum employment. On Thursday, the Labor Department reported that new unemployment claims were lower than expected, signaling continued strength in the labor market.
In parallel, US Treasury yields mirrored gold’s upward trend, with the 10-year T-note rising three and a half basis points to yield 3.74%. However, this increase has not bolstered the US dollar, as reflected by a 0.31% drop in the US Dollar Index (DXY), which now stands at 100.62.
Looking ahead, Philadelphia Fed President Patrick Harker is set to speak, though the remainder of the week’s docket is relatively sparse in terms of US economic data.
