Gold retreats as Fed officials temper rate cut hopes

Gold prices edged lower as hawkish Fed comments cooled expectations of imminent rate cuts.

Gold’s rally this week was halted as remarks from multiple Federal Reserve officials dampened hopes of an immediate interest rate cut. The precious metal had surged above $2,390 an ounce following softer US economic data, prompting bets on potential monetary easing.

However, gold retreated from its highs on Thursday as Fed policymakers struck a more hawkish tone, cautioning against premature expectations of rate reductions. Several members of the central bank’s rate-setting committee emphasised that much more evidence of declining inflation would be required before considering rate cuts.

Spot gold (XAU/USD) was trading at $2,385.89 an ounce by 07:45 BST on Friday, trimming its weekly gain. Although softer-than-expected consumer price index readings had fuelled the yellow metal’s ascent, the prospect of a rate cut in September faded as traders adjusted their expectations in response to the Fed officials’ comments.

Consequently, the dollar and US Treasury yields rebounded from earlier losses, weighing on gold’s. While the precious metal flirted with record highs, technical indicators suggest limited upside momentum in the near term, with the relative strength index (RSI) showing divergence and slowing momentum.

On the daily chart, gold bulls jumped in to support the metal at $2,278, with a break below this level potentially signalling further declines. The next support level is seen at $2,195. Conversely, a breach of the all-time high at $2,430 could propel gold towards $2,500, although the technical outlook does not align with a move higher at present.

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