Gold Awaits Follow-Through
Gold sticks to positive bias; lacks bullish conviction amid a broadly firmer USD
Gold (XAU/USD) holds modest intraday gains through the first half of the European session on Friday, though it lacks strong follow-through buying amid mixed fundamental cues. Geopolitical tensions stemming from the intensifying Russia‑Ukraine war and ongoing conflicts in the Middle East continue to support demand for the safe‑haven precious metal. However, the post‑FOMC recovery of the US Dollar (USD) keeps a lid on any meaningful upside move.
A hawkish assessment of Federal Reserve (Fed) Chair Jerome Powell’s remarks on Wednesday has helped the USD extend its rebound from the lowest level since February for the third consecutive day. This, in turn, discourages traders from placing aggressive bullish bets on non‑yielding Gold. Strong follow‑through buying is needed to confirm that this week’s corrective slide from the all‑time peak above $3,700 has run its course.
The President of the United States said on Thursday that his Russian counterpart had let him down and insisted that US allies must stop purchasing oil from Russia to bring the war in Ukraine to an end. Moreover, European Commission President Ursula von der Leyen stated that the EU will propose accelerating the phase‑out of Russian fossil imports.
Meanwhile, the Israeli army carried out several strikes on southern Lebanon, targeting Hezbollah’s military infrastructure. A spokesperson said the operation was in response to Hezbollah’s attempts to rebuild its activities in the area. These developments keep geopolitical risks elevated and offer some support to safe‑haven Gold.
The US Federal Reserve, as expected, lowered borrowing costs for the first time since December 2024 on Wednesday and indicated that more rate cuts would follow through the end of this year amid a softening labor market. However, Powell emphasized that inflation risks remain tilted to the upside and said he does not feel the need to move quickly on rates.
Adding to this, data released Thursday showed that new claims for unemployment benefits fell sharply to a seasonally adjusted 231,000 for the week ending September 13, down from a near four‑year high. Furthermore, the Philadelphia Fed Manufacturing Index surged from 1.7 to 23.2 in September, its highest level since January.
These factors have helped the USD preserve its strong recovery from a three‑and‑a‑half‑year low, limiting aggressive bullish positioning in Gold.
Gold prices remain supported by geopolitical risks but capped by a broadly firmer USD. Traders await confirmation through sustained buying above key resistance levels before positioning for a resumption of the broader uptrend.