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Gold gives up record highs on profit-taking
AI Summary
- Gold prices declined in the European market due to profit-taking and correction, as well as pressure from a strong rise in the US dollar.
- Federal Reserve Chair Jerome Powell's cautious remarks raised doubts about two additional rate cuts in the US, impacting gold prices.
- Analysts predict that gold will hold above $3,750 in the short term, with potential for a new resistance level at $3,900, driven by geopolitical turmoil and economic uncertainty.
Gold prices declined in the European market on Wednesday for the first time in the last four sessions, retreating from record highs, as correction and profit-taking activity intensified, in addition to pressure from the strong rise of the US dollar in the foreign exchange market.
This comes after cautious remarks from Federal Reserve Chair Jerome Powell regarding further monetary easing in the United States, which increased doubts about two additional rate cuts during the remainder of this year.
Price Overview
• Gold prices today: Gold fell by about 0.4% to $3,750.82, from the opening level at $3,764.29, with a session high at $3,772.33.
• At Tuesday’s settlement, gold gained 0.5%, marking a third consecutive daily rise and a new record high at $3,791.13 per ounce.
US Dollar
The dollar index rose on Wednesday by 0.4%, on track for its first gain in the last three sessions, reflecting a strong rebound in the US currency against a basket of major and minor counterparts.
This recovery comes amid growing doubts over two additional rate cuts before year-end, especially after Powell adopted a cautious tone on further monetary easing.
US Interest Rates
• Powell said on Tuesday that the central bank will continue to balance concerns surrounding labor market weakness and growing inflation risks.
• According to CME Group’s FedWatch tool: the probability of a 25-basis-point rate cut at the October meeting is currently priced at 92%, while the probability of no change stands at 8%.
• To reprice these probabilities, investors are closely monitoring upcoming US economic data and comments from Federal Reserve officials.
Gold Outlook
• Ole Hansen, Head of Commodity Strategy at Saxo Bank, said: “The recent gold rally is fueled by falling US funding costs, alongside a mix of investor concerns, including overvalued equities, Fed independence, and rising geopolitical risks.”
• Ricardo Evangelista, Senior Analyst at ActivTrades, said: “With geopolitical turmoil and economic uncertainty driving safe-haven demand, and expectations of a looser monetary stance by the Fed growing, gold is expected to hold above $3,750 in the short term, with potential for a new resistance level at $3,900.”
SPDR Fund
Gold holdings with the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained unchanged on Tuesday at 1,000.57 metric tons, the highest since August 3, 2022.
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