Gold Prices Forecast: Profit-Taking, Fed’s Cautious Tone Capping Gains

Gold Prices Slip as Fed Maintains Cautious Tone

Gold prices declined on Tuesday following cautious remarks from U.S. Federal Reserve policymakers and profit-taking after gold reached an all-time high the previous day. The momentum loss is partly due to traders reducing positions ahead of Wednesday’s Fed meeting minutes, anticipating usual volatility.

At 10:28 GMT, XAU/USD is trading $2417.44, down $9.09 or -0.37%.

Profit-Taking and Cautious Fed Remarks

After hitting a record high, gold prices experienced a pullback as investors secured gains. The cautious stance of the Fed added to the sentiment, with policymakers signaling no immediate rate cuts. Fed Vice Chair Philip Jefferson and Vice Chair of Supervision Michael Barr emphasized the need to see more concrete evidence of inflation returning to the 2% target before easing monetary policy.

Geopolitical Events Support Gold

Geopolitical tensions, including the recent death of Iranian President Ebrahim Raisi in a helicopter crash, bolstered gold’s appeal as a risk offset. Despite the pullback, long-term investors remain committed due to ongoing geopolitical and financial uncertainties.

Inflation and Economic Data Influence Fed’s Stance

Recent data indicated a continued decline in U.S. inflation, yet the Fed remains cautious. Cleveland Fed President Loretta Mester and San Francisco Fed President Mary Daly highlighted the need to ensure inflation is on a sustained path towards the 2% target. Mester noted that the Fed is prepared to hold or even raise rates if necessary, while Daly expressed no urgency to cut rates due to persistent inflation concerns.

Market Anticipates Delayed Rate Cut

Market sentiment has shifted, with traders now expecting the first Fed rate cut in September instead of June. This adjustment reflects the Fed’s cautious approach, reinforced by statements from key policymakers like Fed Governor Michelle Bowman, who remains open to raising rates if inflation does not sufficiently decline.

Market Forecast

Given the Fed’s emphasis on sustained inflation control and cautious economic assessment, the outlook for gold remains mixed in the short term. While profit-taking has led to a temporary dip, the enduring appeal of gold amid geopolitical tensions and financial uncertainties supports a potentially bullish stance in the longer term. Traders should closely monitor upcoming economic data and Fed communications for further insights into the timing of any policy changes.

Technical Analysis

XAU/USD is drifting lower on Tuesday after reaching a record high the previous session. The early price action suggests the move is nothing more than normal profit-taking. There was no dramatic closing price reversal top, nor is the weakness threatening any minor or major bottoms that could shift momentum to the downside. Furthermore, gold is well-supported by the uptrending 50-day moving average at $2298.55 and the swing bottom at $2277.34. A trade through $2450.13 will signal a resumption of the uptrend.