Gold (XAUUSD) Price Forecast: Will Rising Rate Cut Odds Trigger Breakout Above $4744.34?

Spot Gold Recaptures Key $4744.34 Level as Dollar Weakness and Easing Oil Support the Bounce

Spot Gold (XAUUSD) is edging higher on Tuesday after recapturing the long-term 50% level at $4744.34, signaling the presence of buyers. If this move continues to produce enough upside momentum then we could see an intraday surge later in the session. The first upside target is the intermediate 50% level at $4850.68. However, the major target is the 50-day moving average at $4900.66.

The 50-day MA is critical to the intermediate structure of the market. It’s important because it represents both resistance and a potential gateway to an acceleration into the 61.8% level at $5028.04.

On the downside, a break back under $4744.34 will indicate weak buying or strong selling. We won’t know until we see the follow-through move. What we do know, however, is that the near-term direction of the market will be determined by trader reaction to the pivot at $4744.34.

The trend is mixed. That’s because we have the main swing chart down and the minor swing chart up. We also have support at the 200-day moving average at $4187.91 and resistance at the 50-day moving average at $4900.66.

If you want to be creative, you can even create a pivot using the moving averages. The mid-point of the two moving averages is $4544.33. Since XAUUSD is currently trading on the long-side of this pivot, we’re going to say there is an upside bias, which helps support the idea that we’re setting up for a near-term breakout over the 50-day moving average as long as $4744.34 holds as support.

What’s Driving the Recovery

The bounce is getting support from two places. The U.S. Dollar Index is weaker today and that’s making gold more attractive for foreign buyers. Oil is also pulling back and lower energy prices ease inflation concerns which gives the Federal Reserve less reason to stay tight. Both of those moves are working in gold’s favor right now.

The diplomacy angle is still in the background. Reports of possible renewed U.S.-Iran talks are keeping geopolitical risk from escalating further and that’s stabilizing sentiment across commodity markets including gold.

Outlook

Gold is range-bound until it proves otherwise. The $4744.34 level is the line in the sand. Hold it and the setup for a run at the 50-day moving average stays intact. Lose it and the buyers who just showed up disappear just as fast. A continued weakening in the U.S. Dollar Index and any shift toward lower rate expectations would give gold the fuel it needs to break higher. For now the bias is up but it needs confirmation.

More Information in our Economic Calendar.