**Gold Price Rises Past $2,350 on Waller’s Dovish Comments, Soft US Dollar**
*Adapted from an article by Christian Borjon Valencia, FXStreet*
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Gold surged higher on Thursday, breaking past the psychological $2,350 mark as comments from Federal Reserve Governor Christopher Waller injected fresh dovish sentiment into financial markets. Waller’s statements, expressing concern over the Fed possibly holding rates “too high for too long,” catalyzed a broad-based selloff in the US dollar, while also driving US Treasury yields lower. This environment proved highly supportive for gold, which typically rallies when the greenback softens and real interest rates decline.
This article examines the main factors underlying gold’s recent upswing, focusing on monetary policy expectations, currency market movements, and the broader macroeconomic context. It concludes with a technical analysis outlook and potential scenarios for the precious metal in coming sessions.
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## Dovish Fed Rhetoric Fuels Gold’s Breakout
Gold’s robust performance on Thursday found its primary catalyst in comments from Federal Reserve Governor Christopher Waller. As one of the central bank’s most influential voices, Waller’s perspective often provides valuable insight into the direction of US monetary policy.
**Key highlights from Waller’s speech:**
– He emphasized the Fed “cannot keep the fed funds rate too high for too long,” warning such a stance risks derailing the economy’s “remarkable progress.”
– While acknowledging that inflation remains above the Fed’s 2 percent target, he noted that the “path is starting to look very good.”
– Waller’s tone struck a more cautious note towards further hikes, fueling expectations that the US central bank’s next move could be to cut rates rather than tighten policy.
Following these remarks, market participants moved swiftly to adjust their policy forecasts. According to CME’s FedWatch tool, the probability of a 25-basis point rate cut as soon as September topped 60 percent by Thursday afternoon, up significantly from levels earlier in the week. This adjustment engendered a swift response across key risk assets.
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## US Dollar Slumps, Treasury Yields Retreat
Gold’s latest rally is inextricably tied to the performance of the US dollar, as well as the behavior of US Treasury yields.
**Impact on the US dollar:**
– The Dollar Index (DXY), which tracks the greenback against a basket of six peers, slumped by more than 0.5 percent following Waller’s comments.
– A weaker dollar makes dollar-denominated assets such as gold more affordable for buyers using other currencies, boosting physical and financial demand.
**Impact on Treasury yields:**
– US 10-year yields retreated from their weekly highs, falling below 4.25 percent as traders priced in a less hawkish Fed.
– Lower yields decrease the “opportunity cost” of holding non-interest-bearing assets like gold, increasing their appeal, especially in uncertain environments.
The combined effect of these moves was to fuel a rally in gold, which often benefits from the twin forces of a softer dollar and falling real interest rates.
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## Macro Backdrop Continues to Favor Gold
Beyond immediate central bank developments, the macroeconomic backdrop remains supportive for gold.
**Inflation and central bank demand:**
– Even as US price pressures have cooled relative to 2022 peaks, inflation remains above the Fed’s stated target, preserving some appetite for safe-haven assets.
– Persistent geopolitical tensions in Ukraine, the Middle East, and elsewhere continue to underpin hedging flows into gold.
– Central banks, particularly those in emerging markets, remain net buyers of gold, seeking to diversify reserves away from the US dollar. The World Gold Council has consistently documented robust central bank gold purchases since 2022.
**Investor demand via ETFs and physical buying:**
– With real yields coming under pressure and stock valuations elevated, several funds and institutional investors have increased their gold allocations as a diversification tool.
– In major gold
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