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Gold (XAU) Daily Forecast: Rebounds to $2,325; More Upside Ahead?

By:
Arslan Ali
Updated: Jun 24, 2024, 09:25 GMT+00:00

Key Points:

  • Gold prices rebounded to $2324.27, up 0.13%, supported by geopolitical tensions and uncertainty.
  • Strong U.S. PMI data boosted the dollar, capping gold gains, with key support at $2311.36.
  • Fed rate cut expectations put downward pressure on yields, aiding gold's safe-haven appeal.
Gold (XAU) Daily Forecast: Rebounds to $2,325; More Upside Ahead?

In this article:

Market Overview

Gold prices (XAU/USD) recovered in early European trading on Monday, bouncing back from a retracement slide from a two-week high reached on Friday.

Despite the Federal Reserve’s surprising hawkish stance, which forecasted only one rate cut in 2024, market sentiment still suggests the possibility of two rate cuts this year due to easing inflation pressures.

This expectation has put downward pressure on U.S. Treasury bond yields, which, combined with a softer risk tone, geopolitical tensions, and political uncertainty in Europe, has supported gold as a safe-haven asset.

Impact of Economic Data on Gold and the US Dollar

The stronger-than-expected U.S. Purchasing Managers’ Index (PMI) data released on Friday indicated a resilient economy, boosting the U.S. Dollar to its highest level since May 9. This strength in the dollar has capped further gains for gold.

Additionally, traders appear cautious, preferring to wait for this week’s significant U.S. macroeconomic releases, including the final Q1 GDP print and the Personal Consumption Expenditures (PCE) Price Index.

The flash U.S. composite PMI rose slightly from 54.5 in May to 54.6 in June, the highest level since April 2022, suggesting robust economic performance in the second quarter.

Despite this, the prices paid for inputs fell to 56.6 from 57.2, while output prices decreased to 53.5, one of the slowest increases in the past four years. These data points, alongside softer consumer and producer prices and disappointing retail sales, keep the possibility of two rate cuts this year viable.

The CME Group’s FedWatch Tool indicates a more than 60% chance that the Federal Reserve will start cutting interest rates at the September meeting, with further reductions anticipated in December. This scenario puts downward pressure on Treasury yields, providing support for gold prices.

Geopolitical Tensions and Political Uncertainty

Geopolitical developments continue to play a significant role in the gold market. A security pact between Russian President Vladimir Putin and North Korean leader Kim Jong-un has heightened the risk of escalating geopolitical tensions.

Additionally, French President Emmanuel Macron’s decision to call snap elections has introduced concerns about political instability in Europe, further supporting gold’s status as a safe-haven asset.

As traders look ahead to key economic data releases, comments from Federal Open Market Committee (FOMC) members will be crucial in shaping market expectations. The final U.S. GDP and PCE Price Index releases this week will provide further insights into the economic landscape and potential monetary policy adjustments.

Short-term Forecast

Gold prices have rebounded to $2324.27, up 0.13%. The pivot point at $2320.45 is key. Immediate resistance is at $2341.56, $2353.36, and $2368.39. Immediate support is at $2311.36, $2299.06, and $2286.94.

Gold Prices Forecast: Technical Analysis

Gold - Chart
Gold – Chart

About the Author

Arslan, a webinar speaker and derivatives analyst, has an MBA in Finance and MPhil in Behavioral Finance. He guides financial analysis, trading, and cryptocurrency forecasting. Expert in trading psychology and sentiment.

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