Gold Price Forecast: XAU/USD Down to $2,300 Amid Strong US Dollar and PBoC Reduction

Gold price (XAU/USD) experienced fresh supply pressure during the Asian session on Tuesday, partially eroding gains from the previous day’s modest recovery from the $2,287 level, which marked a one-month low.

Investors are scaling back expectations for a Federal Reserve rate cut in September, keeping US Treasury bond yields elevated and supporting the US Dollar (USD) near a multi-week high.

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This combination is undermining demand for gold.US Jobs Data and Interest Rate Speculations
The release of strong US Nonfarm Payrolls data last Friday has fueled speculation that the Federal Reserve will maintain higher interest rates for a longer period.

This expectation is a key factor weighing on the gold price. Following the jobs report, the probability of a September rate cut has fallen to around 50%, with markets now anticipating a single 25 basis point cut in November or December.

The benchmark 10-year US government bond yield is holding steady above 4.45%, while the rate-sensitive two-year US Treasury note remains close to 5.0%, underpinning the USD.

The USD Index, which measures the Greenback against a basket of currencies, is near its highest level since May 14, further capping gold’s upside.

PBoC and Global Gold Demand

The People’s Bank of China (PBoC) sharply reduced its gold purchases in May, ending an 18-month buying spree.

This reduction has contributed to the downward pressure on gold prices. However, industry players expect China to resume its gold purchases once prices stabilize, as the fundamental demand for gold remains strong.

A survey by the Official Monetary and Financial Institutions Forum indicates that central banks plan to increase their gold exposure over the next 12-24 months.

Political Uncertainty and Market Sentiment

Political uncertainty in Europe, particularly French President Emmanuel Macron’s decision to call snap elections later this month, is adding to the geopolitical risks that typically support gold prices.

Traders are cautious and are awaiting key US macroeconomic data, including the latest consumer inflation figures and the Federal Open Market Committee (FOMC) decision on Wednesday, to gain clearer insights into the Federal Reserve’s rate policy.

Conclusion

Gold (XAU/USD) currently faces a mix of bullish and bearish pressures. The upbeat US jobs data and reduced PBoC purchases are headwinds, while geopolitical uncertainties and expectations of renewed central bank buying provide support.

The near-term trajectory of gold will depend heavily on upcoming US inflation data and the FOMC’s policy decisions.

Gold Price Forecast: Technical Outlook

Gold (XAU/USD) is currently trading at $2,300.18, reflecting a decline of 0.32% for the day. The pivot point, a crucial level for market direction, is positioned at $2,313.61. Immediate resistance levels are identified at $2,333.85, $2,356.69, and $2,382.10.

These levels will be key to watch if the price attempts to recover. On the downside, immediate support is noted at $2,287.96. Should the price fall further, additional support levels are found at $2,268.05 and $2,246.72.

These levels are essential to monitor as they could provide a safety net against further declines. Technical indicators show that the Relative Strength Index (RSI) stands at 37, indicating bearish momentum.

The 50-day Exponential Moving Average (EMA) is currently at $2,334.01, serving as a significant resistance level that could cap any upward movement. The outlook for gold remains bearish as long as it trades below the pivot point of $2,313.

A break above this level could boost bullish sentiment, potentially driving the price towards higher resistance levels. However, remaining below this pivot point may lead to increased selling pressure.

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Arslan Butt
Index & Commodity Analyst
Arslan 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.
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