Gold Bullish Pressure Continues Strong
The price of gold (XAU/USD) once again captured global market attention mid-week. After rising more than 0.60% last Wednesday (September 10th), the precious metal continued to strengthen at the start of the Asian session on Thursday (September 11th), briefly trading near $3,645 per troy ounce. Dovish sentiment from the Federal Reserve (The Fed) and geopolitical tensions were the main reasons investors were looking to gold as a safe haven asset.
According to Andy Nugraha, an analyst at Dupoin Futures Indonesia, technical signals still favor buyers. The combination of candlesticks and moving average indicators shows a fairly dominant bullish trend. “If the buying momentum continues, XAU/USD has the potential to reach $3,675. However, if a correction occurs, the nearest support is around $3,619,” he explained.
This statement confirms that gold still has room to rise higher, although the potential for short-term declines must also be monitored.
Fundamentally, gold benefited from the weakening US dollar following the release of lower-than-expected producer inflation (PPI) data. This data bolsters market confidence that the Fed will cut interest rates in September.
Currently, the money market considers a 25 basis point rate cut almost certain. Interestingly, the likelihood of a larger cut, 50 basis points, is also starting to rise, although it remains below 15%.
Lower interest rates lower the opportunity cost of holding gold, making this asset increasingly attractive. The yield on the 10-year US government bond also fell to 4.045%, while the real yield fell to 1.685%.
In addition to monetary factors, global tensions are increasing the demand for gold. Poland recently shot down a Russian drone that was flying over its territory. In the Middle East, Israel launched an attack on Doha, Qatar, targeting Hamas leaders. Qatar considered the action a violation of international law and warned of the risk of escalating the conflict.
Such geopolitical situations typically drive investors to safe-haven assets like gold. Capital flows into the precious metal have increased, supporting the upward price trend.
All eyes are now on the US Consumer Price Index (CPI) report for August, which will be released Thursday evening (September 11). Markets expect headline inflation to rise 2.9% year-on-year, while core inflation is expected to rise 3.1% year-on-year. If inflation exceeds expectations, the US dollar could rise, putting pressure on gold. However, if the data is lower, gold has the potential to continue its rally to higher levels.
