Gold Prices Forecast: Steady as Traders Await Crucial U.S. Data

James Hyerczyk
Published: Jun 25, 2024, 11:00 GMT+00:00

Key Points:

  • Investors await critical U.S. inflation data, expected to influence Federal Reserve policy decisions, due later this week.
  • Chinese yuan's weakness against the dollar prompts increased gold demand from local investors, supporting prices.
  • Gold trading ranges reflect divergent trends in Western caution and Eastern demand, with key U.S. data anticipated.
Gold Prices Forecast

In this article:

Gold Prices Steady as Markets Await Key U.S. Data

Gold prices held steady on Tuesday as investors anticipate crucial U.S. economic data later this week. The precious metal’s performance reflects a complex interplay of global factors, with divergent trends in Western and Eastern markets.

At 10:42 GMT, XAU/USD is trading $2334.35, down $0.085 or -0.00%.

Western Investors Eye U.S. Inflation Data

Western traders are holding their positions as they await the release of U.S. inflation figures, which could provide clarity on the Federal Reserve’s future rate cut timeline. The personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, is set to be released on Friday. This data, along with the U.S. first-quarter GDP estimates due Thursday, could significantly influence gold’s near-term direction.

Chinese Demand Supports Gold Prices

In contrast to the cautious Western stance, weakening Chinese currency is bolstering gold demand in Asia. The onshore yuan hit its lowest level since mid-November against the dollar on Tuesday, prompting local investors to seek gold as a hedge against currency depreciation. This Eastern demand is providing support for gold prices despite traditional headwinds like a strong dollar and high interest rates.

Market Divergence and Trading Range

Gold has recently decoupled from its traditional drivers, with prices now largely influenced by sentiment in China. New players taking highly leveraged positions have pushed prices above levels considered fair value by many Western investors. This disconnect has resulted in gold yo-yoing within a trading range, with relatively light volumes and modest participation from U.S. and European investors.

Short-term Forecast: Cautiously Bullish

Gold has pulled back 5% from its recent record high of $2,449.89 per ounce, but current market conditions point to a cautiously bullish outlook. Strong Chinese demand persists, and potential dovish signals from upcoming U.S. economic data could bolster gold prices in the near term. However, traders should stay alert. Unexpected U.S. inflation figures or changes in Fed policy expectations could swiftly impact market sentiment. This delicate balance of factors suggests a measured optimism for gold’s short-term prospects.

Technical Analysis

Daily Gold (XAU/USD)

XAU/USD is trading back and forth early Tuesday as traders position themselves ahead of Friday’s key inflation data. Traders are focusing on the 50-day moving average at $2341.47,  which is controlling the price action.

A sustained move over the 50-day moving average will indicate the presence of buyers. This could generate the upside momentum to take out the nearest short-term top at $2387.79.

The inability to overcome the 50-day MA will signal the presence of sellers. This could lead to a short-term retest of a pair of bottoms at $2286.83 and $2277.34.

The current price action suggests that gold is a news driven market at this time.

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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