Gold (XAU/USD) Price Forecast & Predictions

Gold dropped below $4,200 on Monday during Asian hours after losing about 2.1% last week. Crude oil price gained strength again, while the US dollar and the 10-year Treasury yield remained above 5%. These pressures have outweighed demand for gold as a safe haven. Gold is heading to $4,000 after breaking the $4,200 support. The price needs to recover above $4,300 to improve the outlook in the short term.

The Federal Reserve raised the target rate to 3.75%-4.00% in September. The market now expects another rate hike by the end of the year. The flash US composite PMI climbed to 58.4 in September, and businesses reported faster growth in costs. The 10-year Treasury yield rose above 5.18% on Monday, while the 10-year inflation-indexed real yield reached 2.85%. The dollar index also remained strong near 101.1. The high yields and a strong US dollar make it harder for gold to recover.

Crude oil prices add another risk to the outlook for the precious metals. Brent oil rose above $103 on Monday as concerns about shipments of oil through the Strait of Hormuz persisted. The conflict could draw buyers to gold for safety. But higher oil prices also raise fears of inflation. The expectations of higher inflation may keep the interest rates higher for longer. The easing of tensions between the US and Iran could lower oil prices and Treasury yields, but the reduced demand for the safe haven might offset some of the gains in gold.

The U.S. job openings on Tuesday, August PCE inflation on Wednesday and the September jobs report on Friday will likely drive the next move in gold price. Strong inflation or hiring could keep the US Treasury yields high. But a softer reading would give gold a better chance to rebound.

A daily close below $4,200 would strengthen the bearish signal and increase the risk of a drop toward $4,000. A weekly close below $4,000 would increase the risk of deeper corrections. A recovery above $4,300 is required to push the prices back above $4,500. A daily close above $4,500 would confirm a bottom and initiate a rally towards the $4,800-$5,000 zone. Gold needs to recover above $5,000 to open the way for $5,600. 

The macro view would improve if inflation data comes softer. The softer inflation or jobs data may pull real yields and the US dollar lower. A continuation of positive momentum in oil prices would increase the bearish pressure on gold in the short term. The geopolitical tensions in the Middle East may still support gold in the long term. However, the higher oil prices may increase expectations of a rate hike, which may trigger a decline in gold.