Gold Price Forecast: XAU Inches Up as U.S. Dollar Weakens Amid Debt Negotiations

Highlights

• Gold prices rise slightly as the U.S. dollar weakens.
• Investors await U.S. personal consumption expenditure (PCE) data for inflation insights.
• Uncertainty persists for gold prices until U.S. interest rates peak.

Overview

Gold (XAU) prices are up slightly from their lowest point in two months on Friday. This is being supported by a decrease in the value of the U.S. dollar, as traders assessed the ongoing negotiations regarding the U.S. debt ceiling and the Federal Reserve’s plan to raise interest rates.

At 12:00 GMT, Gold (XAU) is at $1952.88, up $12.27 or +0.63%. On Thursday, the SPDR Gold Shares ETF (GLD) settled at $180.22, down $1.73 or -0.95%.

The current decline in the U.S. dollar has provided some relief for gold traders. However, the potential resolution of the U.S. debt issue and the anticipation of another interest rate hike by the Federal Reserve before July continue to limit the upward movement of gold prices.

Hits 3-Month Low Amidst Dollar Strength

Gold reached its lowest level since March 22, trading at $1,936.59 earlier in the week, resulting in a 1.3% decrease for the week overall. This decline occurred as the U.S. dollar, considered a safe-haven currency, strengthened. Although the U.S. dollar weakened slightly on Friday, it is still expected to record its third consecutive weekly gain.

Investors Await PCE Data Impact

There is now anticipation among investors for the release of U.S. personal consumption expenditure (PCE) data, which is a key indicator of inflation favored by the Federal Reserve. This data, expected to be released at 12:30 GMT, will provide further guidance on the future direction of interest rates.

Under Pressure Amid Rate Expectations

Gold is currently facing pressure due to diminishing expectations of interest rate cuts. Market predictions indicate a 41.7% chance of a 25-basis-point interest rate hike in June, while 58.3% anticipate that the Federal Reserve will maintain its current rates, as per Fed fund futures.

Gold enthusiasts may experience ongoing uncertainty leading up to the next Federal Open Market Committee (FOMC) decision, making it challenging for gold prices to sustain a recovery until U.S. interest rates reach their peak level.

Technical Analysis

Gold (XAU) is trading on the bearish side of $1956.30 (S1), putting it in a weak position.

Overcoming $1956.30 (S1) will indicate the counter-trend buying is getting stronger. If this creates enough near-term momentum then look for a surge into the PIVOT at $2002.54.

A sustained move under $1956.30 (S1) however, could extend the selling into $1923.06 (S2).

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