Gold staged a recovery on Friday, snapping a two-day losing streak and climbing 0.69% despite a firmer US Dollar. Buyers re-entered near the weekly low around $3,630, driving XAU/USD higher into the North American session. The metal last traded at $3,670.
XAU/USD recovers as Fed cut underpins low-rate outlook
The rebound followed the Federal Reserve’s (Fed) decision to lower the federal funds rate by 25 basis points, with projections signaling two more cuts before year-end. While Fed Chair Jerome Powell characterized the move as a “risk-management cut” and avoided calling tariff-driven inflation “transitory,” the broader low-rate environment continues to favor gold.
Trade dynamics also played a role. Swiss gold exports to the US collapsed by 99% in August after tariff concerns, before exemptions were clarified in early September. However, Asian demand more than compensated—Chinese imports surged to 35 tonnes, the highest since May 2024, while flows to India also strengthened.
Daily market movers: Gold surges amid firm Dollar
- The US Dollar Index (DXY) rose 0.26% to 97.61.
- US Treasury yields climbed, with the 10-year note up 2.5 bps at 4.137%, while real yields gained nearly 3 bps to 1.757%.
- Fed officials offered mixed signals: Minneapolis Fed President Neel Kashkari backed this week’s cut to counter labor market risks, but warned hikes remain possible if growth and inflation accelerate. Governor Stephen Miran revealed he favored a 50 bps cut and confirmed he represents the lowest dot in the Fed’s projections, adding that current policy should not stray far from neutral.
- Markets now price a 91% probability of another 25 bps cut at the October 29 meeting, according to Prime Market Terminal.
- Key upcoming data include S&P Global flash PMIs, durable goods orders, GDP figures, jobless claims, and the Fed’s preferred inflation gauge, the Core PCE.
Technical outlook: Gold uptrend resumes above $3,650
Gold’s recovery above $3,670 signals renewed bullish momentum, with the Relative Strength Index (RSI) rebounding after easing from overbought territory. The next resistance levels are seen at $3,750 and $3,800.
On the downside, a drop below $3,650 could expose the September 11 low at $3,613, followed by the $3,600 psychological level.
