Image Source: Pixabay

• Gold prices jumped over 1% on Friday after Fed Chair Powell hinted at upcoming rate cuts, expressing confidence in inflation nearing the 2% target.
• The US Dollar Index (DXY) fell 0.82% to 100.68, as Powell’s remarks pushed traders to bet on a 50 bps rate cut in September.
• US 10-year Treasury yields dropped five basis points to 3.80%, supporting bullion's rise, as the market now eyes the August Nonfarm Payrolls report for further guidance.

The price of gold edged up over 1% on Friday as the greenback and US Treasury bond yields plummeted following dovish remarks from Federal Reserve Chair Jerome Powell, who signaled confidence that inflation is edging towards the 2% goal and that rates should be cut. The XAU/USD was seen trading at around the $2510 mark after bouncing off Friday's daily lows of $2484.

Bullion prices rose sharply as Powell said, “The time has come for policy to adjust." He acknowledged that inflation is on the path to 2%, and expressed that the Fed has shifted towards achieving the maximum employment mandate.

After those remarks, gold reclaimed the $2500 figure, and the greenback extended its losses. The US Dollar Index (DXY), which measures the dollar’s performance against a basket of six currencies, dropped 0.82% and was seen trading at 100.68.

US Treasury bond yields immediately dropped, with the US 10-year benchmark note slumping five basis points to 3.80%. Traders increased their bets that the Fed would cut rates by 50 bps at the September meeting.

The CME FedWatch Tool showed that market participants had fully priced in a 25 bps cut, while odds for a larger size stood at 36.5%, up from 24% on Thursday.

Now, with the Fed shifting attention towards the jobs market, the August Nonfarm Payrolls report would be the last piece of the puzzle to determine the size of the cut.

Market Movers: Gold Price Advanced Ahead of Next Week's US Inflation Report

• If US economic data continues to be soft, the gold price uptrend will remain intact, which would increase speculation about a big-size rate cut.
• After Powell’s speech, other Fed officials made notable comments. Philadelphia Fed President Patrick Harker stated that the Fed needs to lower rates methodically. Chicago Fed President Austan Goolsbee added that monetary policy is currently at its most restrictive level, and the Fed’s focus is now shifting toward achieving its employment mandate.
• Next week, the US economic docket will feature Durable Goods Orders, the Conference Board (CB) Consumer Confidence index, Initial Jobless Claims data for the week ending Aug. 24, and the Fed’s favorite inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index.
• Additionally, Fed speakers led by Christopher Waller and Atlanta’s Fed President Raphael Bostic would cross the wires to prepare the ground ahead of the September meeting.

Technical Outlook: Gold’s Uptrend Remained Intact as Buyers Eyed $2,550 Level

Gold's uptrend remained intact, and it could be extended if buyers were able to lift prices above the all-time high of $2,531. A breach of the latter would expose the $2,550 mark, followed by the $2,600 figure.

On the flip side, if gold could achieve a daily close below the $2,500 level, a re-test of the previous all-time high of $2,483 could be in the cards. If surpassed, gold’s next support would be the May 20 peak of $2,450, followed by the 50-day Simple Moving Average (SMA) at $2,402.

(Click on image to enlarge) 

More By This Author:

Gold Falls Overriding Dovish Fed Signals Ahead Powell Speech
Gold Price Stays Around $2,500 Post US Fed Minutes
AUD/JPY Price Forecast: Clings To Gains Below 97.00 As Downtrend Remains