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Gold Prices Forecast: Price Movement Tied to Treasury Yields, Dollar Value

By:
James Hyerczyk

Gold prices fluctuate with the dollar's fall and lower Treasury yields, while Fed decisions loom as key influencers along with next week's CPI data.

Gold Prices Forecast

In this article:

Key Points

  • Fluctuating gold prices linked to dollar’s weakening.
  • Lower yields increase gold’s desirability.
  • Future Fed decisions pivotal for gold’s direction.

Yields and Dollar Driving Price Action

Gold is putting together a mixed-to-lower performance on Wednesday, influenced primarily by two key factors: a decline in U.S. Treasury yields and a weakening of the U.S. Dollar Index. These developments are pivotal in driving the current increase in gold prices. Uncertainty over the timing of future Fed rate cuts is also making traders hesitant to commit to a major position in either direction.

At 06:56 GMT, XAU/USD is trading $2033.51, down $2.38 or -0.12%.

Decline in Treasury Yields

The drop in U.S. Treasury yields is a significant factor behind the rise in gold prices. Lower yields make gold, a non-yielding asset, more attractive to investors by reducing the opportunity cost of holding it. This typically results in increased demand for gold, leading to higher prices.

Weakening of the U.S. Dollar

Concurrently, the softening of the U.S. Dollar Index is bolstering gold’s appeal. A weaker dollar makes gold less expensive for investors using other currencies, thus increasing its global demand and contributing to the uptick in its price.

Fed Policy Impact

Additionally, traders are attentive to the Federal Reserve’s potential policy changes. Any indications from Fed officials suggesting a dovish approach or likelihood of interest rate cuts could further enhance gold’s attractiveness as an investment, considering its role as a hedge against inflation.

Market Outlook

In the short term, the outlook for gold remains positive, influenced by these economic indicators and monetary policy expectations.

Traders are advised to keep a close watch on Federal Reserve member statements and upcoming economic data, particularly inflation figures, as these will play a crucial role in shaping gold’s price movement in the near future.

The current market trend suggests a continued rise in gold prices, though this is subject to change based on evolving economic and Fed policy conditions.

Technical Analysis

Daily Gold (XAU/USD)

Gold (XAU/USD) is currently straddling the 50-day moving average at $2033.57. This price is controlling both the short-term and intermediate trends.

A sustained move over the 50-day MA will indicate the presence of buyers. If this is able to increase momentum then look for a surge into the recent resistance at $2067.00. This price is also a potential trigger point for an acceleration to the upside.

Conversely, the inability to move above the 50-day MA will signal the presence of sellers. This could trigger a near-term break into support at $2009.00. This is also a potential trigger point for an acceleration to the downside with the 200-day moving average, currently at $1965.94, the next major downside 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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