Gold Prices Forecast: XAU/USD Prices Waver Amid Rising Dollar, Treasury Yields

Highlights

• Gold prices decline with rising U.S. dollar.
• Treasury yields impact non-interest-paying bullion.
• Federal Reserve’s rate decisions influence XAU/USD market sentiment.

Market Dynamics and Gold Prices

Gold (XAU/USD) prices are lower on Tuesday as the U.S. dollar and Treasury yields rose, causing investors to eagerly anticipate a pivotal consumer inflation report for indications on prospective Federal Reserve actions regarding interest rates this year. The market is currently hovering around the midpoint of its one-month range, and a noticeable lack of volume may signal concerns for buyers.

At 06:21 GMT, Gold (XAU/USD) is trading $1912.32, down $12.535 or -0.65%. December Comex futures are at $1930.70, down $5.90 or -0.31%.

The Dollar and Treasury Yields Influence

The dollar has reached a 10-month high, and the 10-year Treasury yields have ascended to a 16-year peak, impacting the value of non-interest-paying bullion, which is denominated in dollars. The strengthened U.S. dollar and higher interest rates diminish the appeal of gold, a non-interest-bearing asset, thus impacting its demand and price stability.

Federal Reserve’s Stance and Investor Sentiment

The Federal Reserve’s indication of maintaining higher interest rates for an extended period has caused shifts in investor expectations and market movements. Investors are now factoring in the possibility of another rate hike to be announced in either November or December, based on the recent pronouncements and scheduled meetings of the Federal Reserve this year.

Potential Government Shutdown and Economic Indicators

The looming potential of a U.S. government shutdown, scheduled to begin on October 1 if there’s no resolution in the federal budget negotiations, continues to heighten tensions and market instability. Investors are keeping a close watch on various economic indicators and the Federal Reserve’s preferred inflation gauge, the personal consumption expenditure price index, as well as upcoming data from the housing sector, to gauge the economic trajectory.

Short-Term Forecast

In the short term, unless significant breakthroughs occur in the economic landscape, and prevailing concerns are alleviated, the market sentiment for gold remains bearish. The prospective release of pivotal economic data, and any ensuing policy adjustments by the Federal Reserve, will be critical determinants in shaping investor sentiment and market movements in the coming months.

Technical Analysis

Gold (XAU/USD) is currently experiencing a modest decline in its 4-hour price, positioned at $1911.80, slightly beneath its recent close of $1914.72. Notably, the precious metal is trading below both its 200-4H and 50-4H moving averages, marked at $1918.60 and $1923.45 respectively, signaling a potential bearish trend.

The 14-4H RSI reading stands at 35.78, indicative of a weakened momentum, verging on the oversold territory.

With a clear Main Support Area between $1893.07 and $1885.79 and a Resistance Area ranging from $1946.99 to $1954.88, the prevailing market sentiment for Gold (XAU/USD) leans bearish in the short term.