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Gold prices experienced a significant uptick on Thursday, October 10th, following the release of mixed economic data from the United States and comments from Federal Reserve officials. While a slight increase in inflation provided a temporary boost, the overall trend was influenced by the anticipation of potential interest rate cuts and conflicting perspectives among Fed members.
Economic Data Influences Gold Prices
The US Department of Labor announced that inflation rose slightly in August, albeit at a slower pace than anticipated. This development, coupled with weaker-than-expected job market data, suggested that the Federal Reserve might be inclined to reduce interest rates in the near future. In response, the swaps market adjusted its expectations, now predicting a 25 basis point interest rate cut at the November meeting.
Fed Officials’ Diverging Views
Federal Reserve officials offered varying perspectives on the appropriate course of action regarding interest rates. Chicago Fed President Austan Goolsbee indicated a preference for gradual rate cuts over the next year and a half, as inflation approaches the Fed’s target of 2%. New York Fed President John Williams echoed this sentiment, suggesting that further rate cuts are likely, but their timing and pace would depend on economic data and the evolution of inflation.
However, Atlanta Fed President Raphael Bostic expressed a more cautious stance, suggesting that the Fed might consider pausing rate cuts in November. This divergence in views among Fed members added to the uncertainty surrounding future monetary policy decisions.
Technical Analysis
From a technical perspective, gold prices exhibited a positive trend following their dip to a weekly low of $2,603. The Relative Strength Index (RSI) indicated a slight upturn, suggesting that bullish momentum was regaining traction. However, for a sustained uptrend, gold prices would need to break above the October 8 daily high of $2,653.
If gold prices manage to surpass $2,653, the next resistance levels would be at $2,670 and $2,685. Conversely, failure to maintain above $2,650 could lead to a downward correction, potentially targeting the $2,600 level. A breach of this support could further weaken the bullish outlook, with the 50-day Simple Moving Average (SMA) at $2,540 serving as a potential downside target.
Gold prices experienced a surge on Thursday, driven by mixed US economic data and differing perspectives among Federal Reserve officials regarding interest rate policy. While the overall trend remains positive, technical indicators suggest that further price appreciation hinges on the ability to break above key resistance levels. Investors will continue to monitor economic data and Fed officials’ comments for clues about future monetary policy decisions, which will significantly impact gold prices.
