Gold Prices Forecast: XAU/USD’s Appeal Dims as Yields, US Dollar Climbs

James Hyerczyk
Published: Mar 14, 2024, 10:25 GMT+00:00

Key Points:

  • Dollar's gain, higher yields lower gold prices on Thursday
  • Slight rise in Treasury yields, focus on PPI before Fed meeting
  • U.S. dollar up; June rate cut probability at 67%
Gold Prices Forecast

In this article:

Gold Prices Respond to U.S. Dollar and Treasury Yields

Gold prices are lower on Thursday, influenced by the strength of the U.S. dollar and higher Treasury yields. Trader focus is on upcoming U.S. economic data, which could impact expectations for a Federal Reserve rate cut.

At 11:07 GMT, XAU/USD is trading $2169.99, down $4.40 or -0.20%

Treasurys and Economic Data

U.S. Treasury yields have increased slightly, with attention turning to the Producer Price Index (PPI) for February, a key indicator of wholesale inflation. Expectations are for a 0.3% monthly increase, while core-PPI, excluding food and energy, is anticipated to rise by 0.2%. This data release is crucial before the Federal Reserve’s meeting on March 19-20, where interest rates are expected to remain stable. However, indications of future rate cuts are eagerly awaited. Earlier, the Consumer Price Index (CPI) for February exceeded expectations, increasing concerns about persistent inflation.

US Dollar Inches Higher

The U.S. dollar is strengthening against other major currencies, with traders evaluating recent CPI data and its implications for the Federal Reserve’s policy. The probability of a June rate cut is currently seen at 67%, slightly down from earlier estimates. Upcoming U.S. economic data, including retail sales and jobless claims, will be closely monitored for further insights into the economy’s trend and the Fed’s potential actions.

Gold Market Outlook

The stronger dollar and higher bond yields have reduced gold’s attractiveness, as it becomes pricier for holders of other currencies and offers no yield. Upcoming U.S. economic reports will be crucial in shaping market expectations regarding the Fed’s rate decisions. Although the recent CPI data caused a minor dip in gold prices, the outlook remains broadly supportive. Traders currently assign a 67% chance to a June rate cut. The Fed’s upcoming ‘dot plot’ projections and developments in China’s economy and consumer demand will also be key factors influencing gold prices.

Short-Term Market Forecast

Considering the current economic indicators and the Federal Reserve’s upcoming meeting, the short-term outlook for gold appears cautiously bullish although the market is vulnerable to a near-term correction. The precious metal’s price might find support if the upcoming PPI data aligns with expectations, indicating sustained interest in gold amid economic uncertainties.

Technical Analysis

Daily Gold (XAU/USD)

XAU/USD is consolidating slightly below its all-time high for a fourth session on Thursday as traders await the next catalysts that could trigger a resumption of the rally, or the start of a near-term correction.

Taking out $2195.24 will signal a resumption of the uptrend and could trigger an acceleration to the upside.

Meanwhile, a failure at $2150.66 could be the sign of weakness that fuels a massive liquidation break. Given the February 14 main bottom at $1984.305 and the March 8 main top at $2195.235, the most likely downside target is its 50% to 61.8% retracement zone at $2089.77 to $2064.88, followed by the 50-day moving average at $2052.00.

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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