**Gold Price Surges Past $2,350 on Dovish Fed Comments and Softer US Dollar**
*By Anil Panchal, FXStreet*
**Overview**
Gold prices climbed sharply on Wednesday, breaking above the key barrier at $2,350 per ounce, boosted by dovish remarks from Federal Reserve Governor Christopher Waller and a retreating US dollar. Investors interpreted Waller’s comments as a sign that the US central bank may soon consider lowering interest rates, thus increasing gold’s allure as a non-yielding asset.
This rally not only affirmed gold’s standing as a trusted safe-haven but also underscored the pivotal role played by US macroeconomic data and Fed signaling in driving the precious metal’s price movements. The combination of subdued US economic indicators, a reduced likelihood of aggressive rate hikes, and suspected central bank demand has placed gold in a favorable position for further gains.
**Key Drivers of Gold’s Rally**
Several interrelated factors contributed to the latest surge in gold prices. These include:
– **Dovish Federal Reserve Comments**: Christopher Waller, a prominent Fed governor, struck a more accommodative tone during his public remarks. He suggested that recent inflation data has been promising and indicated openness to rate cuts should the trend persist.
– **Softening US Dollar**: The greenback declined against its major counterparts, providing a tailwind for dollar-denominated gold. A weaker dollar typically makes gold cheaper for non-US buyers.
– **Subdued US Economic Data**: Recent US macro data points, including labor and manufacturing statistics, have shown signs of moderation, fueling speculation that the Fed could adopt a less hawkish stance.
– **Firmer Central Bank Buying and Investor Demand**: Ongoing purchases by global central banks, as well as sustained interest from institutional and retail investors, continue to underpin gold prices.
– **Geopolitical Uncertainty**: Persistent geopolitical tensions in several regions have encouraged risk-averse flows into gold.
**Dovish Shift from Fed’s Waller**
Fed Board Governor Christopher Waller’s commentary was the primary catalyst for gold’s upward move. During a speech on Tuesday, Waller acknowledged that there have been “quite a few months of good inflation data,” and he signaled that continued progress could open the door for Fed rate cuts. This marks a subtle but meaningful shift from the central bank’s previously more cautious tone.
Waller emphasized the following points:
– The risk of persistent inflation appears to be retreating.
– If positive inflation data continue, then the case for lowering interest rates will strengthen.
– The Fed will remain data-dependent but is now more willing to consider policy adjustments.
Markets responded by betting on earlier and potentially more frequent rate cuts, which tend to boost non-yielding assets like gold.
**US Dollar Retreats**
The US dollar index (DXY), which tracks the greenback against a basket of major currencies, experienced notable weakness following Waller’s speech. The lower-for-longer outlook for US rates diminished the dollar’s yield advantage while boosting the appeal of alternative assets such as gold.
– The DXY fell through key technical support levels, further fueling gold’s upside.
– Other major currencies, especially the euro and yen, gained ground on the dollar, amplifying gold’s demand.
**Soft US Economic Data Encourages Gold Bulls**
Recent economic data out of the United States have painted a picture of moderating activity. Notably:
– US manufacturing indices have shown contraction or muted growth.
– The labor market, while still generally robust, has displayed signs of cooling.
– Consumer spending growth has slowed, raising concerns about the economy’s resilience.
These developments, in combination with Waller’s dovish message, convinced many investors that Fed policy is likely to ease over the coming quarters.
**Technical Analysis: Gold’s Path Forward**
From a technical standpoint, gold’s move above $2,350 represents a significant breakout. Before this rally, gold had been consolidating below key resistance levels, even
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