Gold Prices Forecast: XAU/USD Climbs as Dollar Weakens Ahead of GDP Data

James Hyerczyk
Published: Apr 25, 2024, 09:58 GMT+00:00

Key Points:

  • Gold rises with a 0.2% drop in the dollar index.
  • US GDP growth projected at 2.4% for Q1.
  • Fed decisions hinge on upcoming core PCE data.
Gold Prices Forecast

In this article:

Gold Market Overview

Gold prices are inching higher today as the US dollar weakens, with market participants actively awaiting key US economic data that may influence the Federal Reserve’s decisions on interest rates. A decrease in the dollar index by 0.2% against a major currency basket is enhancing the appeal of dollar-priced gold for international buyers.

At 09:43 GMT, XAU/USD is trading $2326.38, up $10.43 or +0.45%.

Anticipated Economic Data

Investors are focusing on several critical economic indicators scheduled for release this week. The US gross domestic product (GDP) for the first quarter is expected to show a growth of 2.4%, according to economists surveyed by Dow Jones. Moreover, weekly initial jobless claims and the personal consumption expenditures (PCE) price index, which is the Fed’s favored gauge of inflation, are also due. These data points are likely to be significant in shaping the Federal Reserve’s upcoming policy decisions.

Market Sentiment and Expectations

While the market is not anticipating changes in interest rates at the next Federal Reserve meeting, investors are watching for hints of potential rate cuts later this year. Market sentiment, as tracked by CME Group’s FedWatch tool, suggests a possible rate cut by September, depending heavily on the trend of incoming economic data. Furthermore, gold prices have corrected significantly, dropping over $100 from the April 12 peak of $2,431.29, influenced by profit-taking and easing tensions in the Middle East.

Short-Term Outlook for Gold

The short-term direction for gold prices will depend heavily on the upcoming US economic data releases. If the core PCE index meets or falls below expectations, the dollar could weaken further, which might push gold prices higher. On the other hand, if inflation figures come in above expectations, gold might face downward pressure as it would likely lead to a more aggressive interest rate stance from the Fed.

In conclusion, the gold market is displaying cautious optimism, bolstered by a weakening dollar and strategic purchases from Asia, particularly China. However, the upcoming US economic data and Federal Reserve policy decisions are key factors that could influence market sentiment. Traders are preparing for a potential uptick in gold prices, dependent on favorable economic reports and stable interest rate projections.

Technical Analysis

Daily Gold (XAU/USD)

The short-term trend is down, but Gold (XAU/USD) remains well-supported by the intermediate and long-term trends.

The short-term range is $2146.15 to $2431.59. Its 50% level at $2288.87, is the first downside target. Earlier this week, the market tested $2291.46. If this level fails as support, the selling could possibly extend into the 50-day moving average at $2198.94.

The minor range is $2431.59 to $2291.46. Its 50% level at $2361.52 is a potential upside target. Trader reaction to a test of this level will determine whether the buying is strong enough to challenge the all-time high, or if the selling pressure resumes.

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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