Gold prices experienced a slight increase on Monday, reaching an all-time high of over $2,630, driven by growing expectations that the U.S. Federal Reserve (Fed) will lower interest rates in November. The XAU/USD pair was trading at $2,627, reflecting gains of more than 0.20%.
U.S. equities showed a resurgence in risk appetite on Monday, as bullion traders reached record levels in the last two trading days, despite a strengthening U.S. dollar. The primary catalyst for this rally appears to be a decline in U.S. Treasury yields, with the yield on the 10-year T-note at 3.741%, which has not increased amid the Fed officials’ hesitance to pursue aggressive rate cuts.
Economic data from the U.S. presented a mixed picture. S&P Global’s Flash PMIs indicated a bleak outlook for manufacturers, while the services sector remained resilient, albeit with a slight deceleration compared to August’s figures.
Additionally, the Atlanta Fed’s GDP Now model forecasts a growth rate of 2.9% for Q3 2024, despite signs of a softening labor market.
On Monday, regional presidents of the Fed acknowledged the increasing risks associated with a weakening labor market but resisted the notion of implementing a 50 basis point rate cut, opting for a more cautious and gradual approach in future meetings.
While this tempered the XAU/USD rally, escalating tensions in the Middle East, particularly between Israel and Hezbollah, could dampen risk appetite and further boost gold prices. According to the Associated Press, the Pentagon announced the deployment of additional U.S. troops to the region amid rising violence.
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