Gold Prices Forecast: XAU/USD Strengthens Amid Dollar’s Downturn, Inflation Speculation

Highlights

• Gold ascends as dollar retreats; eyes on U.S. inflation data.
• Technical struggles at XAU/USD’s 200-day moving average.
• Gold emerges as a top safe haven amid economic uncertainties.

Gold Price Movement Amid Dollar Retreat

Gold (XAU/USD) prices witnessed an upswing on Monday, propelled by the dollar’s downturn as the market eagerly awaits the forthcoming U.S. inflation data, potentially influencing the Federal Reserve’s stance on interest rates.

Spot gold increased by 0.43% to reach $1,927.28 per ounce, offsetting the 1% loss from the previous week, while its U.S. futures counterpart also ascended by 0.43% to $1,951.00. Experts anticipate that gold will maintain its foothold above the $1,900 threshold, especially if the U.S. dollar’s downturn continues, driven by speculation regarding the Federal Reserve’s next steps.

Technical Analysis and Inflation Outlook

From a technical perspective, XAU/USD grapples with its 200-day moving average, a significant level that presents challenges. Market analysts highlight that any shortfall in U.S. inflation could exert further pressure on the dollar.

This, coupled with the anticipated U.S. Consumer Price Index (CPI) data set for release on Wednesday, could significantly inform the Federal Reserve’s interest rate decisions. Concurrently, gold futures experienced a slight surge on Friday, motivated by the dollar’s minor pullback, settling at $1,942.70.

Dollar’s Position and Upcoming Decisions

Despite recent setbacks, the dollar is on track for its most extended weekly triumph since 2014, largely due to robust U.S. economic figures. This momentum, however, has nudged gold towards its inaugural weekly decline in nearly a month. The focal point for investors now shifts to the impending U.S. inflation figures slated for September 13, followed by the Federal Reserve’s policy verdict on September 20.

Gold as a Safe Haven Amid Inflation Uncertainties

Despite the considerable investments funneling into the dollar and Treasuries, gold continues to allure many as a safe haven, providing crucial support to its price. Notably, even if the forthcoming CPI figures align with expectations, the Fed’s primary measure – the personal consumption expenditures price index – remains fairly resilient.

A potential economic slowdown, paired with persistent inflation, could catapult gold to the forefront among other safe havens. Presently, traders are hedging their bets, with a 93% likelihood of the Fed maintaining the current rates in September and a 43% probability of an additional rate hike preceding 2024.

In essence, the market sentiment appears cautiously bullish for gold, contingent upon the Fed’s unfolding decisions.

Technical Analysis

Based on the 4-hour chart for Spot Gold (XAU/USD), the current price of $1927.58 is slightly above the 200-4H moving average of $1926.47, indicating a marginal bullish tendency. It’s slightly below the 50-4H moving average of $1932.46, suggesting caution. The 14-4H RSI at 54.37 leans bullish, showing somewhat stronger momentum.

Main support resides between $1893.07 and $1885.79, while main resistance spans from $1946.99 to $1954.88. Given these factors, the market sentiment appears cautiously bullish, contingent on breaking the 50-4H MA and staying above main support.