Gold price forecast have been trending lower as shifting market dynamics, including rising U.S. Treasury yields and a stronger dollar, exert pressure on the precious metal. The once-optimistic sentiment for aggressive Federal Reserve rate cuts in November has diminished, leaving gold struggling to maintain its value. With a key level of support at $2616.25, gold faces potential declines if it drops below this threshold. In this article, we explore the factors driving this bearish sentiment and provide insights on what to expect next in the market.
Recent Gold Price Declines Amid Fading Rate Cut Hopes
Gold price forecast fell recently, moving lower as optimism around significant Federal Reserve rate cuts in November waned. Although gold is still close to its all-time high of $2685.64, it remains vulnerable, with key support around $2616.25. If gold fails to hold above this level, prices could fall further toward $2578.24. Traders are eyeing a possible technical bounce at this point, but the bearish trend seems to dominate the market.
Impact of Strong U.S. Private Payroll Data on Rate Cut Odds
The decline in gold was primarily triggered by stronger-than-anticipated U.S. private payroll data for September. The economy added 143,000 jobs, surpassing the 128,000 forecast. This data suggests that the U.S. labor market remains robust, reducing the probability of a significant rate cut by the Federal Reserve. The likelihood of a 50-basis-point rate cut in November has decreased from 49% to 34%, according to the CME FedWatch Tool. This news has negatively impacted gold, which generally thrives in a low-interest-rate environment.
Richmond Fed President Thomas Barkin also indicated that achieving the Federal Reserve’s 2% inflation target might take longer than expected, dampening hopes for substantial rate cuts. As a result, demand for non-yielding assets like gold has decreased.
Geopolitical Tensions Provide Limited Support for Gold
While geopolitical conflicts, particularly in the Middle East, have prompted some safe-haven buying of gold, this has not been enough to counter the overall bearish trend. Tensions flared when Israel bombed Beirut in response to attacks from Iran-backed Hezbollah, following a missile strike on Israel by Iran. Although these developments initially boosted gold prices, the overall impact has been subdued due to the growing expectations of limited Federal Reserve rate cuts.
Analyst Zain Vawda from MarketPulse noted that despite the initial spike in safe-haven demand, the reduced likelihood of aggressive rate cuts has kept gold prices in check.
Rising Treasury Yields and Strong U.S. Dollar Weigh on Gold Prices
The increase in U.S. Treasury yields is another significant factor putting pressure on gold prices. On Thursday, the 10-year Treasury yield rose to 3.8056%, while the 2-year yield reached 3.6539%. Higher yields make gold less attractive as an investment because gold does not generate interest. The strengthening U.S. dollar has compounded these challenges, making gold more expensive for international buyers.
The U.S. dollar index climbed to 101.916, reflecting renewed confidence in the U.S. economy and dampening the chances of aggressive rate cuts. As the dollar strengthens, gold becomes less appealing, further limiting its upside potential.
Market Forecast: Bearish Short-Term Outlook for Gold
Looking ahead, the short-term forecast for gold price remains bearish. Much of the market’s attention is on the upcoming U.S. non-farm payroll report. If the report shows strong job growth, gold prices could break below the $2616.25 support level, potentially testing $2578.24. However, if the data signals weakness in the labor market, such as rising unemployment, gold could see renewed buying interest, possibly pushing prices back up toward $2700.
For now, the combination of rising Treasury yields, a stronger U.S. dollar, and reduced expectations of rate cuts suggests that gold will continue facing downward pressure.
Conclusion
Gold prices are currently under pressure due to rising U.S. Treasury yields, a strengthening U.S. dollar, and diminished hopes for significant rate cuts. While geopolitical tensions have provided limited support, they have not been enough to offset these bearish factors. Investors should monitor upcoming U.S. economic data, especially the non-farm payroll report, as it could dictate gold’s next move. For more updates on the gold market, visit Daily Gold Signal for real-time insights. To stay updated on daily gold market trends, visit Daily Gold Update.
