Gold Price Forecast: Dips to $2,340 Amid Strong USD and Hawkish Fed

The recent downturn in gold prices, with XAU/USD dipping to an intra-day low of $2,340 from a level around $2,345, highlights a bearish

Written by: Arslan Ali Butt • Tuesday, May 28, 2024 • 2 min read

• Last updated: Tuesday, May 28, 2024

Gold Price Forecast: Dips to $2,340 Amid Strong USD and Hawkish Fed

The recent downturn in gold prices, with XAU/USD dipping to an intra-day low of $2,340 from a level around $2,345, highlights a bearish shift influenced by a resurgent US dollar.

GOLD Price Chart - Source: Tradingview — GOLD Price Chart – Source: Tradingview

The dollar’s strength was revived by hawkish Federal Reserve minutes and robust US economic indicators, which not only boosted the dollar but also applied downward pressure on gold prices. Additionally, a risk-on sentiment fueled by the recovering US economy further contributed to gold’s decline.

Upcoming Economic Indicators to Watch

This week, market participants are focused on the US Conference Board’s Consumer Confidence report and remarks from Fed officials Neel Kashkari, Mary Daly, and Lisa Cook, looking for cues that might influence the dollar’s strength and, in turn, gold prices.

Attention will particularly be drawn to the Core Personal Consumption Expenditures (PCE) Price Index release on Friday. Persistently high inflation readings and hawkish commentary from Fed officials could reinforce the dollar, potentially adding further pressure on gold prices.

Geopolitical Tensions Fuel Safe-Haven Demand

The geopolitical landscape also plays a critical role, with recent Israeli airstrikes in Gaza escalating tensions. This event has not only sparked international outcry but has also driven investors towards safe-haven assets like gold, amid growing global instability.

Fed’s Policy and Economic Data’s Role

Moreover, insights from the latest Fed meeting suggest a longer road to achieving a 2% inflation target, with market odds for a September rate cut now diminished. Economic projections show a modest uptick in GDP growth and expectations of sustained inflation, factors that underpin the dollar’s strength against gold.

Despite bullish forecasts from financial institutions predicting significant rises in gold prices over the next few years, the immediate outlook remains bearish unless the metal surpasses key resistance levels outlined in technical analyses.

Technical Analysis Summary

Currently, gold trades just below $2,344, struggling beneath a pivot point of $2,351.57. The market’s technical indicators, including a Relative Strength Index (RSI) at 39 and a 50-day EMA at $2,381.81, suggest bearish momentum with potential support levels at $2,326.60 and $2,307.23 if downward trends continue. Unless these resistance thresholds are overcome, gold’s price may continue to face headwinds in the short term.

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ABOUT THE AUTHOR See More

Arslan Ali Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Ali Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.