Gold rallies above $2,700: Rate cuts ahead?

Gold prices have surged past $2,700, marking a third consecutive day of gains, fueled by signs of cooling U.S. inflation. As inflation eases, investors speculate that the Federal Reserve may slow its rate hikes, potentially leading to rate cuts that would benefit gold.

Softer inflation and rate outlook

The December U.S. CPI showed a slight uptick in inflation but a slower-than-expected rise in core CPI, fueling optimism that the Fed may reduce its aggressive tightening. Investors now anticipate a nearly 98% chance the Fed will hold rates steady in January, which has boosted gold’s appeal.

Gold as a safe haven asset

Gold thrives in uncertain economic times, especially when inflation cools and rates drop. As U.S. Treasury yields decline, gold becomes more attractive due to lower opportunity costs. Despite the Fed's cautious tone, markets expect inflation to ease further, raising the likelihood of rate cuts and supporting gold's rise.

Outlook for gold

With gold hovering above $2,700, traders are watching the Fed's next move. Technical indicators suggest that gold may be approaching overbought conditions, but the ongoing uncertainty and potential for rate cuts could support continued gains. Resistance is seen around $2,711 and $2,720, while support lies at $2,668 and $2,657.

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Read the full article here: https://www.fxstreet.com/analysis/gold-rallies-above-2-700-is-softer-inflation-setting-the-stage-for-rate-cuts-202501170917