Gold (XAU) forecast experienced a decline recently, influenced significantly by the strengthening U.S. dollar. This drop followed an initial boost triggered by Federal Reserve Chair Jerome Powell’s hints at potential interest rate cuts. Let’s delve into the latest trends and factors impacting gold prices.
Gold Prices Retreat as Dollar Strengthens
Gold (XAU) forecast saw a setback on Thursday, erasing recent gains fueled by Federal Reserve Chair Jerome Powell’s comments. As of 10:43 GMT, XAU/USD traded at $2435.29, reflecting a decline of $12.28 or -0.50%.
Fed Signals Possible Rate Cut
On Wednesday, Powell suggested that a rate cut in September might be on the table, indicating the Fed’s approach to taming inflation is nearing its end. This led to a temporary gold prices peak, reaching near its recent high of $2,483.60 set on July 17.
Market Reactions
Despite Powell’s dovish stance, the resurgence of the dollar overshadowed gold’s appeal. Peter Fertig from Quantitative Commodity Research commented, “Powell’s indication of a possible September rate cut supports gold. However, the stronger U.S. dollar impact and weaker euro present a counteracting effect.”
Treasury Yields and Economic Data
U.S. Treasury yields fell to multi-month lows on Thursday, influenced by Powell’s remarks. The focus is now shifting to Friday’s U.S. payrolls report. Strong job growth could challenge the likelihood of a September rate cut.
Central Bank Gold Demand
According to Citi analysts, central bank demand for gold is expected to stay robust through 2024/2025. This trend is driven by de-dollarization efforts, reserve diversification, and growing alternative fiat needs among emerging market central banks.
Global Economic Landscape
The Bank of England is anticipated to announce its latest interest rate decision soon. Analysts are split on the potential outcome. In the U.S., Thursday’s initial jobless claims and manufacturing sector insights will precede Friday’s key jobs report.
Market Forecast
Short-term prospects for gold may be bearish due to the dollar’s strength. Nevertheless, medium to long-term outlooks remain positive, supported by possible rate cuts, persistent geopolitical tensions, and ongoing central bank demand. Traders should be cautious with short positions near range lows and closely monitor upcoming economic data for market-moving events.
Technical Analysis
Gold prices (XAU/USD) is currently trading above key support levels. It remains on the strong side of 50% retracement levels at $2418.47 and $2380.54. Additionally, gold is above the 50-day moving average at $2362.60, which serves as significant support. The daily chart shows potential for reaching the record high of $2483.74, though buyers may await a catalyst to push prices higher.
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