Gold (XAU/USD) Price Forecast: Drops to $2304 Amid Fed’s Hawkish Signals

The price of Gold (XAU/USD) concluded its four-day climb, dipping under the $2,300 mark on Thursday. Despite this, the metal found some buyers during the Asian trading session on Friday, signalling resilience among investors.

However, a sustained upward trajectory remains uncertain due to recent hawkish signals from the Federal Reserve.

On Wednesday, the Fed’s “dot plot” revealed plans for just one interest rate cut in 2024, potentially dampening the allure of the non-yielding metal. Concurrently, buoyant global equity markets could further restrain gold’s traditional gains as a haven.

Impact of Fed’s Hawkish Stance:

The Federal Reserve’s projection to reduce interest rates only once in 2024 compared to the previously anticipated three cuts might bolster the U.S. Dollar, consequently pressuring gold prices.

Nonetheless, this week’s milder inflation metrics hinted at possible earlier rate reductions, supported by the CME Group’s FedWatch Tool, which now shows a heightened likelihood of a rate cut as early as September.

Data and Political Dynamics Offer Mixed Cues:

Recent U.S. economic data painted a mixed picture. The Producer Price Index (PPI) for May increased by 2.2% year-on-year, below expectations and the prior month’s readings, suggesting subdued inflationary pressures.

Despite these figures and a static Consumer Price Index (CPI) for May, geopolitical tensions and political uncertainty in Europe, especially with France’s upcoming snap election, provide some downside protection for gold prices.

Investors are now eyeing the Preliminary Michigan US Consumer Sentiment Index, slated for release on Friday. This data could sway U.S. Dollar movements and offer fresh cues for short-term gold price predictions, as traders gauge consumer confidence in the face of evolving economic conditions.

Gold Price Forecast: Technical Outlook

In today’s market, Gold (XAU/USD) edges slightly higher, currently priced at $2304.81, marking a modest increase of 0.03%. The metal navigates a complex landscape shaped by a critical pivot at $2311.21.

Over the four-hour trading window, gold faces substantial resistance at $2325.10, with further hurdles at $2336.79 and $2348.12. Should momentum shift, the metal’s support levels at $2287.82, $2271.74, and $2254.20 will be tested.

Technical indicators paint a nuanced picture; the Relative Strength Index (RSI) hovers at 43, suggesting a bearish undertone in the market.

Additionally, the 50-Day Exponential Moving Average (EMA) sits at $2324.71, reinforcing resistance near the pivot point. The analysis indicates a bearish trend below $2311, but a climb above this threshold could ignite a more bullish sentiment.

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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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