Gold Prices Forecast: XAU/USD Underpinned by Weak Dollar, Capped by Firm Yields

Highlights

• Gold gains influenced by weaker dollar and Fed outlook.
• Fed minutes and job data impact gold prices.
• Mildly bullish short-term forecast for gold.

Gold Eyes Weekly Gains Amid Fed and Dollar Moves

Gold (XAU/USD) prices are trader steady-to-lower on Friday, eyeing a second straight week of gains, influenced by a softer U.S. dollar and traders’ reading of the Federal Reserve’s rate hike plans. The precious metal’s current trend is a reflection of shifting market expectations about the Fed’s next moves. February Comex gold futures are stable at $2014.10, with spot gold showing a minor dip.

Dollar Weakness and Yield Fluctuations

A weaker dollar, heading for another weekly drop, is making gold cheaper for buyers with other currencies. Meanwhile, Treasury yields, which recently dipped to a two-month low, are impacting gold’s upside.

Fed Minutes and Job Data Weigh on Gold

Key factors driving gold’s price include the latest jobless claims data and the Fed’s minutes. While jobless claims dropped more than expected, bond markets as well as gold remained unfazed. The Fed minutes revealed caution about future rate hikes and ongoing high inflation concerns. However, October’s CPI figures, showing easing inflation, add to the complex outlook for gold.

Near-Term Gold Outlook: Mildly Bullish

In the near term, traders are betting on the Fed holding rates steady in December, with some speculation about a possible rate cut by March. Gold’s path will also hinge on today’s manufacturing and services data.

The short-term forecast for gold is mildly bullish, as traders weigh potential dovish shifts from the Fed against mixed economic indicators. The current market environment suggests a window of opportunity for gold to benefit if the Fed signals any easing in its rate hike strategy.

Technical Analysis

Gold (XAU/USD) is currently trading above both its 200-day and 50-day moving averages, which are at 1940.67 and 1934.96 respectively. This positioning above these key moving averages suggests a generally bullish trend in the medium term.

The current price is also hovering near the minor support level of 1987.00, indicating that this level could act as a pivot in the short term.

If the price holds above this support, it may test the minor resistance at 2009.00, and potentially aim for the main resistance at 2067.00. However, a break below the minor support could see the price moving towards the main support at 1952.21.

The overall market sentiment for gold, considering its position relative to these technical indicators, leans towards bullishness, with the possibility of continued upward movement if it maintains above the minor support level.