Latest Trends in the Cryptocurrency Market: Impact of Rising Gold Prices and U.S. Economic Indicators

Gold prices saw a slight rise during Friday's Asian trading hours, maintaining a bounce back near the psychological level of 3500 Dollar. This precious metal has been trading around the All-time high recorded last week and continues to receive support from multiple factors.

Among market participants, there is a growing view that the Federal Reserve (FRB) will implement at least two 0.25% interest rate cuts by the end of the year. As a result, the Dollar is weakening, and the appeal of gold, a non-yielding asset, is relatively increasing. Additionally, uncertainties related to trade are also boosting the demand for gold as a safe-haven asset.

However, the overall positive atmosphere in the stock market may put some pressure on gold prices, which are currently in an overbought state in the short term. Traders are showing a tendency to refrain from taking aggressive positions and are waiting for the U.S. employment statistics, which are scheduled to be announced during North American hours. These employment statistics are expected to provide important clues regarding the direction of the Fed's monetary policy and will likely influence the short-term trends of the U.S. Dollar and XAU/USD.

Impact of US Economic Indicators on Gold Prices

The economic indicators from the United States announced on Thursday suggest a cooling labor market, raising expectations for an interest rate cut by the Fed this month. Specifically:

• According to ADP's private employment statistics, the number of new jobs in August increased by 54,000, falling short of the 106,000 increase in July (revised from an initial 104,000 increase) and the forecast of 65,000.
• According to a report from the U.S. Department of Labor, the number of new unemployment insurance claims for the week ending August 30 increased to 237,000, exceeding expectations of 230,000 and the previous week's figure of 229,000.
• On the other hand, the U.S. ISM Services Purchasing Managers' Index rose to 52.0 in August, up from 50.1 in July.

These indicators suggest a possibility of the Federal Reserve strengthening its monetary easing stance.

Market Experts' Opinions

John Williams, president of the New York Federal Reserve, stated on Thursday that the central bank needs to balance the current risks of inflation and the labor market. He noted that factors related to trade and immigration are slowing economic activity, and he expects this year's GDP growth rate to be between 1.25% and 1.5%. He also predicts that the unemployment rate will rise to about 4.5% next year and indicated that if the economy progresses as expected, gradual interest rate cuts will be implemented.

Chicago Federal Reserve President Austin Goolsbee pointed out on Friday that the labor market is deteriorating and there is a possibility of inflation reigniting. Goolsbee stated that interest rates are a better indicator of the labor market than the increase in employment figures, adding that the market is in a wait-and-see state due to uncertainty.

Technical Analysis of Gold Prices

XAU/USD is bouncing back from the recent support level of the 23.6% Fibonacci retracement level, around 3,300 Dollars, or the support line of the 100-day simple moving average (SMA). This coincides with a recent breakout from a range-bound market that has lasted for several months, supporting the rise trend of gold.

However, since the daily Relative Strength Index (RSI) is in the overbought zone, there is a possibility of some adjustments or moderate declines before entering the next upward phase. If further rises break through the $3,560 region, there may be resistance around $3,578-$3,579 or near the all-time high recorded on Wednesday. If the subsequent momentum persists in uncharted territory, gold prices may aim for a target of $3,600.

On the other hand, if a corrective decline occurs, there is a possibility of finding good support near the psychological level of $3,500 around the 23.6% Fibonacci retracement level. If further selling pressure is applied, it may drop to the $3,440 region or the breakout point of the range.

FAQ about the Federal Reserve System (FRB)

What is the role of the FRB and its impact on the Dollar?

The FRB is the institution that decides the monetary policy of the United States and has two missions: price stability and full employment. The FRB primarily aims to achieve these goals through interest rate adjustments. If the inflation rate exceeds the target of 2%, the FRB raises interest rates, increasing the overall borrowing cost in the economy. This tends to strengthen the Dollar. Conversely, if the inflation rate falls below 2% or if the unemployment rate is high, the FRB may lower interest rates to encourage borrowing, which puts downward pressure on the Dollar.

What is quantitative easing (QE)? What is the impact on the Dollar?

Quantitative easing is an unconventional policy measure adopted by the Federal Reserve (FRB) in extreme circumstances. This is a process in which the FRB issues new currency and purchases high-rated bonds from financial institutions, injecting a large amount of credit into the financial system. Quantitative easing typically has the effect of weakening the Dollar.

What is quantitative tightening (QT)? What is the impact on the Dollar?

Quantitative tightening is the opposite process of quantitative easing. The Federal Reserve stops purchasing bonds from financial institutions and does not reinvest the principal from maturing bonds into new bond purchases. This typically has a positive impact on the value of the Dollar.