Gold Prices Forecast: Early Strength Capped by 50-Day Moving Average Resistance

James Hyerczyk
Published: Jun 24, 2024, 10:08 GMT+00:00

Key Points:

  • Gold prices increase on easing Treasury yields and anticipation of inflation data influencing Fed.
  • Market watches PCE data and Fed speeches for clues on potential rate cuts and gold trends.
  • Investors eye end-of-the-year target at $2,600 per ounce as Fed rate cut chances rise with soft landing data.
Gold Prices Forecast

In this article:

Gold Prices Edge Higher as Traders Eye U.S. Inflation Data

Gold prices saw a slight increase on Monday, recovering some of last Friday’s losses. This rise comes as U.S. Treasury yields eased, with traders eagerly awaiting key inflation data later this week that could influence the Federal Reserve’s interest rate decisions.

At 09:56 GMT, XAU/USD is trading $2325.675, up $3.800 or +0.16%.

Focus on U.S. Economic Data

Investors are closely monitoring incoming U.S. economic data. Should this data suggest a soft landing for the economy, it may prompt the Federal Reserve to cut interest rates, thereby supporting gold prices. Current projections are targeting a gold price of $2,600 per ounce by the end of the year.

Key Events This Week

The Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation measure, is scheduled for release on Friday. Additionally, speeches from at least five Fed officials, including San Francisco Fed President Mary Daly and Fed Governors Lisa Cook and Michelle Bowman, are expected to provide further insights into the Fed’s policy direction.

Market Expectations

According to the CME FedWatch Tool, traders are pricing in a 66% chance of a rate cut by the Federal Reserve in September. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, which is beneficial for its price. Despite U.S. business activity reaching a 26-month high in June, price pressures have significantly decreased, indicating potential economic slowdown.

Treasury Yields and Economic Indicators

Gold traders are also paying close attention to Treasury yields and other economic data following last Friday’s sharp decline in gold prices. The decline was triggered by firm yields and a surge in U.S. Services PMI, which hit its highest level in over two years at 55.1. Furthermore, manufacturing activity showed improvement, adding to mixed signals about the economic outlook.

Short-Term Market Forecast

Considering the current economic indicators and market sentiment, gold prices are likely to remain supported in the short term. With the potential for the Fed to cut rates amid signs of economic slowing, a bullish outlook for gold seems justified. Traders should keep an eye on the PCE data and Fed officials’ speeches for further direction, as these will be pivotal in shaping market expectations and gold’s short-term trend.

Technical Analysis

Daily Gold (XAU/USD)

Although XAU/USD is edging higher early Monday, the technical picture looks bleak with the market trading on the weak side of the 50-day moving average at $2342.23, this is resistance.

If the selling pressure increases, we could see a test of a minor pivot at $2327.80, followed by the recent swing bottoms at $2286.83 and $2277.34.

Looking at the upside potential, clearing the 50-day MA will shift momentum to the upside, while a trade through $2387.79 changes the short-term trend to up.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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