Spot Gold VS Major Correction: Can The Yellow Metal Hold Above $2,500 per Ounce?

- Spot gold prices have retreated from their all-time high (ATH) of $2,532 per ounce reached in August, but the yellow metal is still trading above the psychological support level of $2,500 per ounce, supported by escalating military tensions in the Middle East and ongoing threats from Iran.

- Gold also declined after the release of better-than-expected U.S. durable goods orders data this week. The 9.9% rise in July was the highest reading since May 2020 and helped dispel some of the pessimism surrounding the U.S. economy. This, in turn, reduced expectations that the Federal Reserve would need to sharply cut interest rates to avoid an economic recession.

- A gradual rate-cut program would limit the upside for gold, which is a non-yielding asset and tends to be viewed more attractively when interest rates are lower.

- The likelihood of the Federal Reserve making a significant 0.50% rate cut in September, instead of the standard 0.25% reduction, has dropped below 30%. It had risen to around 35% after Federal Reserve Chairman Jerome Powell gave a clear signal that cuts were on the way during his speech at Jackson Hole.

- Gold is likely to rise in the medium term, but the risk of a correction remains. Although gold is expected to increase, there is also a risk of a sharp pullback due to the increasing long positions.

- Given the Federal Reserve's new focus on its other mandate to ensure "full employment," there is a risk that strong employment figures could trigger the unwinding of these long positions and cause a correction.

- Any stronger-than-expected nonfarm payrolls report or other event that reduces expectations of rate cuts could prompt these investors to take profits, causing a significant correction in gold.

For more educational articles click the link: https://bit.ly/48xXeJy

Open an account now with ATFX and gain access to exclusive insights: https://bit.ly/3O17otO