**Gold Reclaims $2,400 as US Dollar Weakens Amid Growing Economic Concerns and Risk-Off Sentiment**
*Original reporting by FXStreet, rewritten and expanded for depth and clarity.*
Gold prices surged past the psychological $2,400 level early Thursday, driven by weakening demand for the US Dollar and an increasing shift toward safe havens amid growing concerns about the global economic outlook. Worsening US data, anticipation of Federal Reserve rate cuts, and geopolitical uncertainties all contributed to boosting bullion demand.
This marked yet another phase in gold’s continued rally in 2024, with the precious metal serving as a hedge against economic instability and an increasingly volatile geopolitical backdrop. As traders reduce risk exposures and investors worry about central bank maneuvers, gold has retained its appeal as a reserve asset and inflation hedge.
## Key Catalysts Behind Gold’s Ascent
### Weakening US Dollar
The US Dollar softened in early Thursday trading, retreating after recent resilience despite mixed data. The DXY (US Dollar Index), which gauges the strength of the dollar against a basket of major currencies, fell back from recent peaks amid weaker-than-expected economic indicators.
– The DXY slipped below 106.00 as of the latest reading.
– Weak labor market indicators and slowing retail data pointed to an economy under strain.
– A softer dollar typically supports commodity prices, particularly gold, as it becomes cheaper for non-dollar buyers.
According to data released earlier in the week:
– US retail sales gained only 0.1 percent in April, far below the consensus estimate of 0.4 percent growth, signaling consumer fatigue.
– Industrial production remained flat, suggesting stagnation in manufacturing output.
Together, these reports are contributing to a narrative of economic cooling, further pressuring the Federal Reserve to consider rate cuts sometime in the latter half of 2024.
### Receding Fed Rate Hike Expectations
The Federal Reserve’s policy outlook is a primary driver for gold’s momentum. With inflation showing signs of moderating and economic activity weakening, markets are increasingly pricing in future interest rate cuts.
– Fed Chair Jerome Powell recently hinted that further tightening may not be necessary if data trends continue.
– The market-implied probability of a rate cut by September has risen to nearly 70 percent according to CME Group’s FedWatch Tool.
– Yields on 10-year and 2-year US Treasury notes have fallen, making non-yielding assets like gold comparatively more attractive.
Lower interest rates reduce the opportunity cost of holding non-interest-bearing assets like gold. As real yields fall, especially with inflation crests flattening out, gold becomes a more appealing store of value for both institutional and retail investors.
### Rising Geopolitical Tensions
Geopolitical risk remains a persistent tailwind for gold demand. In particular, the ongoing conflicts in Eastern Europe and the Middle East, coupled with rising US-China tensions, have elevated the metal’s role as a geopolitical hedge.
– Renewed fighting in Eastern Ukraine and heightened military posturing in the Taiwan Strait have alarmed global investors.
– Countries continue boosting their gold reserves to sovereign proof assets, with 2024 seeing substantial buying from central banks including China and Turkey.
– Political brinkmanship and potential government shutdowns in the US could elevate volatility and reduce confidence in fiat currencies, further supporting gold prices.
### Technical Factors and Market Sentiment
Gold’s chart structure has been favorable to bulls. After consolidating briefly below the $2,400 level, the yellow metal broke through resistance on strong volume amid a surge in demand from ETFs and hedge funds.
– Spot gold traded above $2,405 during the morning European session.
– Technical analysts note that a solid breakout above $2,410 could pave the way for a move toward $2,435 and potentially $2,450 in the near-term.
– Support is firm at $2,390, where accumulation has occurred repeatedly in recent sessions.
Investor inflows into gold exchange-traded products (ETPs)
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