Gold prices surge following Federal Reserve rate cut
Gold prices experienced a significant rally this week, with XAU/USD surpassing $2,600 after the Federal Reserve announced a 50 basis point rate cut on Wednesday. By the end of the week, gold prices had climbed to $2,625.69, driven by global interest rate reductions, a weaker US dollar, and increasing geopolitical uncertainties.
The Federal Reserve’s decision to lower rates has set the stage for other central banks to follow suit. For instance, the Philippines recently reduced its interest rates by 250 basis points, leading to a benchmark rate of 7%. This move has further bolstered gold prices.
Favorable physical demand for gold
Aside from monetary policy factors, there has been a notable rise in physical demand for gold as investors seek safe havens during uncertain times. Persistent concerns regarding economic slowdowns in the US and China, as well as escalating geopolitical tensions in the Middle East, are driving investors towards gold.
Poland’s central bank has significantly increased its gold reserves, surpassing a value of €29 billion by the end of August. Additionally, Indian gold imports have surged to all-time highs, spurred by a recent reduction in tariffs on gold jewelry and bars, contributing further to the uptrend in the global bullion market.
Stock market maintains bullish momentum
The stock market continues to exhibit strong bullish momentum, with major indices delivering impressive performances. The S&P 500 recently reached new record highs, breaking past previous resistance levels around 5,700 points. This level now appears to act as a support, remaining firm after a slight pullback on Friday.
This steady ascent reflects renewed investor confidence, especially in the technology sector, as market participants express trust in the Federal Reserve’s monetary policy direction. The combination of rate cuts and positive economic indicators is fostering expectations for further market gains.
Source : www.fxleaders.com