Gold price forecast continue to trade positively, hovering just below the $2,500 mark as we begin the week. The precious metal is consolidating its gains from Friday, staying within its usual range as traders look forward to the upcoming US Consumer Price Index (CPI) data. This report will be crucial in determining the extent of the Federal Reserve’s (Fed) expected interest rate cut next week.
Gold Price Supported by Fed Rate Cut Expectations
Gold price forecast remain supported by the daily short-term support level at $2,498. This level holds steady despite some gains in US equity futures, which have shown a slight recovery. The current market environment is risk-averse, and this uncertainty continues to bolster gold prices.
Weaker-than-expected inflation data from China has also contributed to demand concerns in the world’s largest gold consumer. This has led to speculation that Chinese authorities might introduce further stimulus measures to boost their economy, which in turn supports gold prices. China’s inflation rate rose by 0.6% year-on-year in August, falling short of the expected 0.7%. Monthly, the CPI increased by 0.4%, slightly below the 0.5% forecast.
From a broader perspective, the outlook for gold remains positive, driven by growing expectations for a significant Fed rate cut this month. However, any further rise in gold price forecast may be limited by the slight increase in US Treasury bond yields, spurred by a recovery in US stock futures. This could lead to a strengthening of the US Dollar (USD), potentially capping gold’s upside.
Impact of US Labor Market on Gold Prices
The USD made a late recovery on Friday after touching an eight-day low against its major rivals. This bounce-back came in response to a disappointing US labor market report. The US Nonfarm Payrolls increased by just 142,000, missing the estimated 160,000. However, the unemployment rate dipped slightly to 4.2%, aligning with expectations.
These weak employment numbers have rekindled concerns about a potential economic downturn, which negatively impacted risk assets such as Wall Street indices. The sell-off in US stocks triggered a surge in demand for the safe-haven USD, allowing it to make a late comeback.
The risk-averse sentiment also led to increased demand for US government bonds, which in turn pressured US Treasury bond yields on Friday. This helped limit any significant downside for gold prices.
Looking Ahead: US Inflation Data in Focus
As we look forward, gold prices may continue trading within a range until Wednesday when the US inflation data is released. This report is expected to increase volatility in the USD and, by extension, gold prices. The inflation data will be crucial in determining the scale of the Fed’s upcoming rate cut.
Gold Price Technical Analysis: Daily Outlook
In the short term, the technical outlook for gold remains positive as long as prices hold above the 21-day Simple Moving Average (SMA), currently at $2,498. The 14-day Relative Strength Index (RSI) is also rebounding, staying above the 50 level, which supports the bullish potential for gold.
For gold to maintain its bullish bias, it must close above the $2,500 level. The next major resistance is at the record high of $2,532, followed by the psychological barrier of $2,550.
On the downside, if gold faces resistance near the $2,530 level, a daily close below the 21-day SMA at $2,498 could lead to further corrections. The next key support would be the previous week’s low of $2,472. A break below this level would bring the symmetrical triangle resistance-turned-support at $2,459 into focus, potentially signaling a sustained downtrend.
Conclusion
Gold prices remain well-supported as we head into the new week, with the 21-day SMA serving as a key support level. Traders should keep a close eye on the upcoming US inflation data, as it will likely play a significant role in determining the direction of gold prices.
For more insights into the gold market and daily updates, you can visit Daily Gold Signal. To stay updated with the latest gold price movements, you may also want to check out the Daily Gold Update.
