Gold capitalizes on dovish Fed expectations, advances above $1410
- Broad USD weakness boosts the XAU/USD pair on Wednesday.
- US Dollar Index erases the majority of NFP-inspired gains.
- Dovish central bank expectations help gold attract investors.
After making a deep correction following June's impressive rally and dropping below the critical $1400 mark, the troy ounce of the precious metal rose sharply on Thursday and gained nearly $20. As of writing, the XAU/USD pair was trading near $1415, adding 1.2% on the day.
Earlier today, FOMC Chairman Powell in his testimony before the Congress said that trade uncertainties and concerns about global economy continued to weigh on the economy and repeated that the Fed would act 'as appropriate' to sustain the economic growth. Furthermore, Powell also noted that weak inflation could be even more persistent than the Fed was currently anticipating.
Renewed hopes of the Fed adopting an aggressive dovish stance following these remarks weighed on the USD and allowed the pair to turn north. Moreover, major central banks' dovish expectations allowed the precious metal to find demand as a better investment alternative.
Later in the day, the FOMC in its June meeting minutes reiterated that many participants saw a stronger case for a rate cut to put additional weight on the buck's shoulders. The US Dollar Index erased almost all of the gains that it posted since last Friday's employment report and was last down 0.4% on the day at 97.10.
Technical levels to watch for