Gold continues to gain positive traction through the first half of European trading action and bolts to new daily highs. The data shows that gold was in the $1960 price range in the past hour. You can say that gold is at its peak in this European session.
The precious metal managed to regain positive traction on the last trading day of the week. The commodity reversed the previous day's intraday retracement decline from its one-week high. It is caused by Powell’s speech about the low-interest rate.
Fed Chair Jerome Powell's dovish comments continued to weigh on the US dollar which in turn, extended some support for dollar-denominated commodities. From the speech in Jackson Hole Symposium on Thursday, Powell outlined a new monetary policy strategy and hinted at increasing tolerance for higher inflation.
Gold Safe Havens Status
Powell said the Fed is willing to let inflation get hotter than usual to support the labor market. This step was taken to help the wider economy condition. However, the prevalent risk-on mood as illustrated by the rally, robust equity markets-could undermine the gold’s safe-haven status.
This coupled with a good rise in the impact of US Treasury bond yields may further contribute to the upside capping for the non-yielding yellow metal. It could happen at least for now. Therefore, it would be wise to wait for some more definite follow-up purchases.
This may be outside of overnight swing highs which are around $1975-77. This data is important before you position yourself for further appreciation steps. Meanwhile, traders will be taking cues from Friday's second-tier US economic data for some short-term opportunities that might be taken.
Low-Interest Rates are so crucial
Asian stock markets are trading up with mild optimism on Friday (28/08/2020), following a positive close on Wall Street. It is because investors support the Fed's new strategy which implies lower interest rates for a longer period. It is a good clue for everyone.
From a broader perspective, gold which has a fruitless asset character is likely to remain supported by lower interest rates. Unfortunately, Powell's induced rebound in Treasury yields could keep gold's advance is limited. The reason is the relentless rally in US interest rates.
It could trigger a recovery in the US dollar in the coming days. It is as attention now turns to the US Core PCE Price Index and the Michigan Consumer Sentiment Index. In Thursday trading, the price of gold swung wildly around $65 within an hour.
It happened after Powell issued a new framework to tolerate inflation rising above 2%. It’s done in a short time to ensure economic recovery and job creation. In a spontaneous reaction, the US dollar was thrown across the board which pushed gold to a six-day high of $1976.
Dollar Strength Reverses Gold Price
The US dollar could quickly reverse its decline and soar along with the long-term US Treasury yields. This turn can make the Gold commodity fells as low as $1910. The yield on the US 10-year Treasury strengthened 10 basis points at the Fed event.
It is what makes it now trading at its highest level since mid-July at 0.780%. Meanwhile, US long-term inflation expectations hit a 7-month high. The market ignored mixed US Jobless Claims and Q2 GDP data. Gold is managed to recover some ground.
It is to close the day near the $1930 mark. Technically, the gold price movement on the hourly chart managed to break the crucial price at $1935. It is the confluence of the 50, 100-hourly Simple Moving Averages, and bearish 21-SMA.
The hourly Relative Strength Index (RSI) trades flat just above its midline and still supports further upside conditions. That is why; the present increase is trying to retest the psychological $1950 price. It just likes what is coincided with the 200-HMA.
