Gold price hits all-time high as Fed rate cut expectations surge

• Gold hits new all-time high at $2,586 amid rising expectations of a significant Fed rate cut, with a 43% chance of a 50 bps reduction.
• US Treasury yields fall, US Dollar Index drops to 101.09, boosting Gold's ascent.
• Global ETFs experience strong inflows; improved US Consumer Sentiment and lower inflation expectations prompt speculation on more Fed easing.

Gold prices surged to a new all-time high (ATH) of $2,586 and are set to extend their gains as the US Dollar weakens on Friday. Expectations for a bigger interest rate cut by the Federal Reserve (Fed) boosted the non-yielding metal, with talks that it could hit the $3,000 milestone. The XAU/USD trades at $2,582 at the time of writing, posting gains of almost 1%.

According to CME FedWatch Tool data, traders have increased the odds for a 50-basis-point (bps) rate cut by the Fed. A news article by Fed watcher  Nick Timiraous at The Wall Street Journal, along with comments from former New York Fed President William Dudley, sparked a jump from 27% to 43%, while estimates for a 25 bps cut dropped from 73% to 57%.

Therefore, US Treasury yields tumbled and undermined the Greenback. The US Dollar Index (DXY), which measures the buck’s performance against another six currencies, dropped 0.15% to 101.09.

Bullion prices are expected to extend their gains as global Gold ETFs saw a fourth consecutive month of inflows in August, based on data from the World Gold Council last week.

The US economic schedule on Friday revealed the Consumer Sentiment Index for September from the University of Michigan. This index showed an improvement compared to August. Alongside this, inflation expectations dipped, fueling speculation for Fed rate cuts.

Daily digest market moves: Gold price skyrockets above $2,550

• University of Michigan Consumer Sentiment Index rose from 67.9 to 69.0, exceeding estimates of 68.
• Inflation expectations improved from 2.8% to 2.7% for the one year, while long-term expectations increased from 3% to 3.1%.
• Greenback remained under pressure after the US Bureau of Labor Statistics revealed mixed August PPI data. Meanwhile, the number of Americans filing for unemployment benefits rose as expected, surpassing the previous week's reading.
• Data from the Chicago Board of Trade suggests the Fed will cut at least 98 basis points this year, down from 108 a day ago, according to the fed funds rate futures contract for December 2024.

Technical outlook: Gold price surges as buyers eye $2,600

Gold price uptrend remains intact, backed by solid demand and momentum. The Relative Strength Index (RSI) is bullish and, due to the trend's strength, remains shy of hitting 80, which traders usually seek as the “most extreme” overbought level.

With that said, the XAU/USD path of least resistance is upward. The first resistance would be the September 13 peak at $2,586. Once cleared, the next stop would be the $2,600 figure.

Conversely, Gold sellers must drive prices below $2,550 if they want to regain control. The following key support levels that need to be cleared are the August 20 high at $2,531 before aiming at $2,500.