Gold extended the gains and is now trading very close to new historic highs, after the Fed kept interest rates unchanged, while Powell was more dovish during the conference and announced the possibility of a cut in September if the data warrant it. At this point, the swaps market is pricing that the Fed will cut interest rates at the September meeting with a 116% probability (full valuation of a 25bp cut and a 16% chance of another additional 25bp cut). Before the Fed's meeting, it was 108%.
Although there are still many unknowns, and macro data may yet surprise with higher-than-expected readings, so pressure is mounting in the market on yields on US 10-year debt securities, which are slipping below 4.06%. Such a move brings gold, which is inversely correlated to treasury yields, back into investors' favor. The precious metal gained nearly 1.5% yesterday, thus paving the way to test the zones of historical peaks. Further movements on the instrument will depend on incoming data that could change the chances of the Fed's first cut. By the end of the week, we will know two more such important reports: the first will be today's ISM PMI manufacturing data reading, and tomorrow it will be NFP data.
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Gold is slightly moderating its gains during this morning, nevertheless, it seems that as long as the metal remains above the 50- and 100-day exponential moving averages (blue and purple curves on the chart), the technical upward trend is maintained all the time, and this may support gold prices in the medium term. Source: xStation
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