Following the ultra-massive interest rate cut by the Reserve Bank of New Zealand, gold rebounded, continuing the global trend.

A series of neutral or dovish Federal Reserve speeches by Fed officials further supported the precious metal.

Technically, gold/USD entered a short-term downtrend, biasing the price action towards further declines.

Gold (XAU/USD) returned to $2,610 on Thursday after rebounding from the psychological level of $2,600, as gold was boosted by the general decline in global interest rates.

Gold was boosted by the ultra-massive interest rate cut by the Reserve Bank of New Zealand

Gold rebounded overnight after the Reserve Bank of New Zealand (RBNZ) became the latest major central bank to make a significant interest rate cut. The RBNZ made an ultra-massive 50 basis point (bps) reduction in its official cash rate at its October meeting, lowering it from the previous 5.25% to 4.75%. Lower interest rates are beneficial for gold because they reduce the opportunity cost of holding non-interest-bearing assets.

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The RBNZ's move helped to rescue gold from a poor start this week, which had fallen nearly 1.50% so far, mainly against the backdrop of a brighter U.S. economic outlook. This, in turn, fundamentally reduced bets on the Federal Reserve (Fed) implementing another double interest rate cut of 50 basis points at its next meeting in November.

According to data from the CME Fedwatch tool, the market-based likelihood of a 50 basis point (0.50%) interest rate cut by the Fed has now dropped to zero. Meanwhile, the possibility of a modest 25 basis point cut stands at about 85%. In addition, the likelihood of the Fed doing nothing in November has now increased to around 15%.

A series of speeches by Fed policymakers on Wednesday also boosted gold. These were all rated by the FXStreet FedTracker as being in the neutral or dovish zone - meaning supportive of easy policy and low interest rates - and all below the speaker's average (see calendar). The FXStreet FedTracker is a new artificial intelligence tool that measures the tone of Fed officials' speeches on a scale from 0 to 10, from dovish to hawkish.San Francisco Federal Reserve Bank President Mary Daly, a voting member with the lowest score on FedTracker at 2.0, significantly lower than her 3.6 score, stated that one or two more rate cuts are needed before the end of the year, adding, "I am more concerned about the labor market" rather than "accelerating inflation."

U.S. inflation data released on Thursday may further influence the Federal Reserve's decision-making at the November meeting, which in turn could impact gold. The September Consumer Price Index (CPI) is expected to rise by 2.3% year-over-year, higher than 2.5%, while the core CPI is expected to rise by 3.2% year-over-year, matching August's figure. If it is lower, bets on rate cuts may increase again; if inflation remains sticky, the situation is the exact opposite.

Gold Supported by Safe-Haven Demand

However, gold may find support as it continues to attract safe-haven inflows amid escalating geopolitical tensions. Israel continues to launch attacks on targets in Lebanon, with markets remaining on edge, anticipating a retaliatory strike on Iran following last week's ballistic rocket attacks.

Regarding the latest developments, the White House confirmed that Israeli Prime Minister Benjamin Netanyahu spoke with U.S. President Joe Biden on Wednesday, but made no mention of potential Israeli retaliation against Iran. According to Bloomberg News, the Biden administration is urging Israel to limit retaliation against military targets, and Axios News reported that Netanyahu will convene Israel's security cabinet today.

Technical Analysis: Gold's Short-Term Downtrend

Gold continues its short-term downtrend, reaching support just above the psychological threshold of $2,600 before rebounding.

After gold broke out of a narrow range on Tuesday and decisively breached a long-term trendline, the short-term trend has shifted from a previous sideways consolidation to bearish. Given the technical analysis principle that "the trend is your friend," there is a high likelihood of further declines in the short term.

A breach of the $2,600 support level (August 18 high, a round number) could indicate further weakness, moving towards the next downside target of $2,578, with the green 200-period simple moving average (SMA) on the 4-hour chart potentially providing a safety net.

However, bears should proceed with caution, as the medium to long-term trend remains bullish. Should any of these longer upward cycles resume at any time, gold could stall, reverse, and begin a new uptrend.