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Gold Prices Forecast: Fed’s Cautious Rate Stance Boosts Gold’s Appeal

By:
James Hyerczyk
Published: Feb 22, 2024, 11:08 UTC

Key Points:

  • Gold gains for sixth session, closely tracking the 50-day moving average.
  • Gold's allure rises as Israel-Hamas conflict overshadows U.S. Treasurys.
  • Fed minutes reveal hesitation in rate adjustments, boosting gold's appeal.
Gold Prices Forecast

In this article:

Gold is currently experiencing a notable uptrend, marking its sixth session of consecutive gains. This upward movement is largely driven by the market’s effort to surpass the 50-day moving average, a critical indicator of medium-term trends. Overcoming this level could significantly enhance market momentum. Additionally, a decrease in the dollar index has made gold, priced in U.S. dollars, more attractive to international buyers.

At 10:52 GMT, XAU/USD is trading $2029.70, up $3.66 or +0.18%.

Safe-Haven Demand: A Closer Look

The recent increase in gold prices is often attributed to heightened safe-haven demand due to the ongoing Middle East conflicts. While these geopolitical tensions, including the Israel-Hamas war and the Red Sea shipping lane attacks, provide some support to gold prices, the traditional safe-haven assets like U.S. Treasurys, the Japanese Yen, and the U.S. Dollar aren’t showing significant safe-haven flows. It’s important to remember that gold’s appeal often increases when Treasury bond yields fall, as it is a non-interest-bearing asset.

Federal Reserve’s Stance

The latest Federal Reserve meeting minutes indicate a cautious approach towards interest rate adjustments. The majority of policymakers are wary of reducing rates too soon, preferring to wait for more evidence of sustained inflation control. This stance suggests a potential upside for gold, as the Fed is unlikely to make immediate rate changes.

Market Outlook and Economic Indicators

In the short term, gold prices are expected to stay within their current range. Upcoming economic reports, such as the personal consumption expenditure (PCE) data, payroll figures, and Federal Reserve Chair Jerome Powell’s congressional testimony, will be crucial in shaping market sentiment. The slight dip in the dollar index could continue to bolster gold’s appeal to global investors.

Short-Term Forecast

Considering these factors, the short-term outlook for gold leans towards a cautious bullish trend. The market is expected to maintain its current momentum, with a close watch on economic data and geopolitical developments for further direction.

Investors and traders should monitor upcoming economic indicators and Federal Reserve communications for more precise insights into gold’s market movements. In the absence of major news events, gold traders are likely to react to the price action in Treasury yields and the U.S. Dollar over the near-term.

Technical Analysis

Daily Gold (XAU/USD)

XAU/USD is edging higher on Thursday as traders continue to recover from the recent sell-off for a sixth straight session.

The market is currently testing the uptrending 50-day moving average at $2032.59. This price is pivotal to the market’s direction on Thursday.

Overcoming $2032.59 will put gold on the strong side of the 50-day MA, indicating increased buying. If volume rises on the move then look for a potential surge into the nearest resistance at $2067.00 over the near-term.

The inability to overtake $2032.59 will signal the return of sellers and a possible resumption of the downtrend with $2009.00 support the first target price.

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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