The price of gold rose by about 0.5%, helped by lower Treasury bond yields, increased expectations of a significant Fed rate cut in September, as well as the tense situation in the Middle East.
On Friday, Powell said that he believes that the time has come for policy to adjust. The official noted that inflation in the U.S. has declined significantly and the conditions in the domestic labor market are now less tight than those that prevailed before the COVID pandemic in 2019. "Our restrictive monetary policy helped restore balance between aggregate supply and demand, easing inflationary pressures and ensuring that inflation expectations remained well anchored," he added. The official also admitted that his confidence has grown that inflation is on a sustainable path back to 2%, as well as, heightened that the policymakers do not seek or welcome further cooling in labor market conditions.
According to the CME FedWatch Tool, markets see a 38.5% probability of a 0.5% rate cut in September (up from 24% the week before), and a 61.5% probability of a 0.25% rate cut (down from 76.0% the week before), with a 1% rate cut expected by the end of the year. A low interest rate environment tends to boost non-yielding bullion's appeal.
Meanwhile, the US Dollar Currency Index (DXY) consolidated near a 13-month low, and the yield on 10-year US Treasury bonds fell by 1.6 basis points to 3.791%. Experts said that if U.S. yields remain suppressed, gold may fancy taking a run towards $2,550 this week if resistance around $2,530 can be cleared first.
The rise in precious metal prices was also helped by uncertainty caused by ongoing tensions in the Middle East. In addition, experts predict that demand for gold in India will remain high in the upcoming holiday season, as a significant reduction in import duties has made prices attractive. Higher demand in the world's second-largest gold consumer could support a rally in global prices, which hit a record high last week.