Gold Prices Forecast: Soft Dollar, Lower Yields Propel XAU/USD Towards $2,000

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Updated: Nov 23, 2023, 09:18 GMT+00:00

Gold (XAU/USD) nears $2,000 as a weak dollar, cooling economy, and Fed rate cut outlook boost its value.

Highlights

Gold approaches $2,000, boosted by dollar’s dip.
Economic data drives gold’s rising appeal.
Bullish outlook for gold amid rate cut expectations.

Spot, Futures Gold Higher in Light Trade

Gold (XAU/USD) prices inched closer to the significant $2,000 per ounce mark on Thursday, driven by a weaker U.S. dollar and lower Treasury yields. Spot gold reached $1,995.10 per ounce, a slight increase of 0.22%, and even touched a three-week high earlier in the week. U.S. gold futures also saw modest gains.

Dollar Weakness and Gold’s Appeal

The decline in the U.S. dollar by 0.2% against major currencies, combined with light trading volumes due to the U.S. bank holiday, made gold more affordable for international buyers. This weakness in the dollar, following recent economic data and market adjustments to Federal Reserve rate hike expectations, underpins gold’s current strength.

Mixed Economic Signals

While the U.S. dollar experienced a brief rally after data showed a decline in unemployment claims, other economic indicators painted a more complex picture. Orders for long-lasting U.S. goods fell unexpectedly in October, signaling a cooling economy. Additionally, the University of Michigan survey indicated that consumers expect higher inflation in both the short and long term.

Rate Hike Expectations and Gold Prices

Market expectations of Federal Reserve rate cuts in 2024 have moderated, impacting the U.S. Treasury yields and, consequently, gold prices. Lower interest rates typically reduce the opportunity cost of holding non-yielding bullion, making gold more attractive to investors.

Short-Term Outlook for Gold

The interplay between the U.S. dollar’s trajectory, economic data, and Federal Reserve policies suggests a potentially bullish short-term outlook for gold. As investors weigh these factors, the precious metal’s appeal as a safe-haven asset may continue to grow in the face of economic uncertainties.

Technical Analysis

Daily Gold (XAU/USD)

Gold (XAU/USD) is currently trading at $1995.52, positioned between the minor support level of $1987.00 and the minor resistance of $2009.00. This places the price above both the 200-day and 50-day moving averages, set at $1939.90 and $1933.61 respectively, indicating a strong bullish trend in the longer term.

The proximity to the minor resistance suggests a testing point for further bullish momentum. If gold breaks through this resistance, it could target the main resistance at $2067.00. Conversely, a retreat below the minor support could see a retest of the main support at $1952.21.

Overall, the market sentiment leans towards bullish, bolstered by the price’s position relative to key moving averages and its current stance just below minor resistance.

About the Author

James Hyerczykauthor

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.