Gold (XAU/USD) at $2,323: Key Levels Ahead of Fed Rate Decision
During Tuesday's Asian trading session, Gold (XAU/USD) experienced a modest rebound, partially offsetting the losses from the previous day.
During Tuesday’s Asian trading session, Gold (XAU/USD) experienced a modest rebound, partially offsetting the losses from the previous day.
This recovery in Gold prices coincides with the latest U.S. macroeconomic data indicating a softening in inflationary pressures, fostering expectations of a potential Federal Reserve rate cut as early as September.
This prospect provides some support to Gold, a non-yielding asset, although it continues to trade within a tight range established over the past week and remains below its 50-day Simple Moving Average (SMA)—a signal urging caution among bullish investors.
Federal Reserve’s Hawkish Outlook Caps Gold’s Gains
Despite recent dip-buying, Gold’s upside remains capped due to a rejuvenated U.S. Dollar, bolstered by higher Treasury bond yields. This follows the Federal Reserve’s unexpectedly hawkish view last week, suggesting only a single rate cut this year—a revision supported by numerous Federal Open Market Committee (FOMC) members.
This stance enhances the appeal of the U.S. Dollar and dampens prospects for significant gains in Gold prices. Investors would be wise to seek robust buying signals before concluding that the recent downward correction from May’s peak has fully played out.
U.S. Dollar Strength—A Persistent Obstacle for Gold
The resilience of the U.S. Dollar continues to pose challenges for Gold prices, especially as market participants adjust their expectations to just two anticipated rate cuts by the Fed in 2024, down from three earlier projected in March.
This adjustment has helped U.S. bond yields to recoup some of their recent losses, contributing to the Dollar’s strength.
Additionally, comments from Philadelphia Fed President Patrick Harker emphasized the benefits of maintaining current interest rates to control inflation and manage economic risks, further pressuring Gold.
Economic Indicators and Fed Speeches Set to Influence Market
Looking ahead, traders are focused on Tuesday’s U.S. economic releases, including Retail Sales and Industrial Production data, which could provide short-term trading cues in the early North American session.
Moreover, upcoming speeches by several FOMC members are anticipated to further influence the U.S. Dollar and, by extension, Gold prices. These events, alongside broader market sentiment, are expected to offer fresh momentum to the precious metal.
In summary, while the recent U.S. economic data offers some hope for easing monetary policy, Gold (XAU/USD) traders should remain cautious and await stronger buying momentum before positioning for further gains.
This approach aligns with the current market dynamics where Gold’s price forecast remains closely tied to U.S. monetary policy and the resultant shifts in the U.S. Dollar’s strength.
Gold Price Forecast: Technical Outlook
Gold (XAU/USD) is currently trading at $2,323.89. On the 4-hour chart, the pivot point, marked by the green line, is at $2,324.27. This level is crucial as it serves as a balance point for the current price action.
Immediate resistance is seen at $2,325.60, followed by stronger resistance levels at $2,337.08 and $2,348.74. These levels are key barriers that Gold needs to surpass to confirm a bullish trend.
On the downside, immediate support lies at $2,310.99. If this level fails to hold, the next support levels are at $2,298.72 and $2,288.04. These support levels are critical in preventing further decline.
The Relative Strength Index (RSI) is currently at 52.20, suggesting neutral momentum and indicating that the market is neither overbought nor oversold.
The 50-day Exponential Moving Average (EMA) stands at $2,324.27, aligning with the pivot point. This EMA serves as a significant indicator of the market’s direction.
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