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Gold Prices Forecast: XAU/USD’s Struggles Against Dollar and Fed Decisions

By:
James Hyerczyk
Published: Sep 28, 2023, 06:32 GMT+00:00

News on the Federal Reserve's decisions and U.S. economic figures keep gold investors on edge as the XAU/USD hovers nears a six-month low.

Gold (XAU/USD) Prices Forecast

In this article:

Highlights

  • Gold grapples with a stronger dollar and rising Treasury yields, nearing a six-month low.
  • The Federal Reserve’s potential interest rate elevation dims XAU/USD’s luster for the third straight session.
  • U.S. PCE index release awaited; a drop might alleviate gold, while a rise could strain it further.
  • With an eye on U.S. GDP growth and jobless claims, market sentiment veers bearish for gold.

Gold’s Dilemma Amid Rising U.S. Rates

Gold (XAU/USD), having steadied after a significant drop, continues to hover near its six-month low early Wednesday. The root causes? A stronger dollar and the current trajectory of Treasury yields. Investors keenly await U.S. economic figures, hoping for insights into the Federal Reserve’s interest rate decisions.

Decline in Gold’s Appeal

Gold’s allure has diminished for three consecutive sessions. The primary culprit: speculations that the Federal Reserve may sustain elevated interest rates. Such speculations were further fueled by expectations surrounding U.S. inflation data. Consequently, investors, seeking refuge, have turned to the dollar, making gold pricier for international buyers.

Inflation and U.S. Rates

The upcoming release of the U.S. personal consumption expenditures (PCE) index, a key inflation metric for the Federal Reserve, is highly anticipated. An inflation drop might bring respite to gold, potentially curbing expectations of tighter monetary policy. On the contrary, stronger inflation data could exacerbate gold’s challenges.

Federal Reserve’s Stance

Minneapolis Fed President, Neel Kashkari, hinted at the likelihood of a “soft landing” for the U.S. economy, but also raised the prospect of significant rate hikes to combat inflation. Despite these challenges, gold finds solace in steady physical demand, notably from central banks and China.

Market Watch and Outlook

The market’s gaze is fixed on imminent U.S. GDP growth figures and jobless claims. However, looming shadows of a potential U.S. government shutdown, and concerns about interest rates, hint at a bearish short-term sentiment for gold.

Technical Analysis

Daily Gold (XAU/USD)

Gold Spot/U.S. Dollar currently trades at 1874.655, below both the 200-Day and 50-Day moving averages, indicating a bearish trend.

The 14-Day RSI stands at 30.16, signifying an oversold market condition, suggesting a potential reversal or a pullback in the near term.

Meanwhile, the market is trading below the defined trend line support at 1911.45 and under previous support levels at 1901.240 and 1889.369. Considering these factors, the sentiment appears predominantly bearish for Gold Spot/U.S. Dollar.

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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