Gold (CM:XAUUSD) rallied by nearly 2.73% over the past week as recent comments from U.S. Fed Chair Jerome Powell buoyed hopes of a rate cut this year. Gold, a non-interest-bearing asset, becomes more attractive for investors in a lower interest rate environment.
Rising Hopes for a Rate Cut
Earlier this week, Fed Chair Jerome Powell noted that recent economic data indicated that inflation was easing. While Powell did not specify the potential timing of the first rate cut, traders widely anticipate a rate cut in September.
Silver’s Rise
Overall, gold has rallied by nearly 14.5% year-to-date due to strong purchases from major central banks and its appeal as a safe-haven asset during times of economic uncertainty. However, silver (CM:XAGUSD) has been the real returns generator for investors this year, providing a gain of 28.4%. In comparison, the S&P 500 (SPX) and the NASDAQ Composite (NDX) have rallied by about 16% and 21%, respectively, during this period.
Silver’s rise comes amid robust industrial demand in addition to retail buying. The metal has grown in importance due to its role in the world’s green energy transition.
Softening Economy
Furthermore, positive price action for both gold and silver could be on the horizon as recent soft economic data in the U.S. adds more fuel to rate-cut bets. In recent days, first-time applications for U.S. unemployment benefits have ticked higher.
Additionally, the Institute for Supply Management’s (ISM) services Purchasing Managers’ Index (PMI), a key economic indicator, is hovering at a four-month low. The ISM’s PMI provides insights into the economic health of the service sector, which is a key component of the overall economy. The PMI reflects factors such as new orders, employment, and business activity, offering a comprehensive view of economic trends and potential future performance.
Furthermore, a soft NFP (non-farm payrolls) print today could reinforce the case for a softening economic picture. Additionally, rising political uncertainty and geopolitical tensions could continue to drive safe-haven demand for gold.
Is Gold Expected to Rise or Fall?
Not surprisingly, the TipRanks Technical Analysis tool is flashing a Strong Buy signal for gold on a weekly timeframe. This implies traders could consider going long on the yellow metal over the coming periods.
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