Gold (XAU) Daily Forecast: Bullish Momentum Holds Above $2,630; US PMI Events Ahead
Gold jumped off to a good start in the week as it pushed into the area of $2,630, as investors seek havens with safer assets.
Gold jumped off to a good start in the week as it pushed into the area of $2,630, as investors seek havens with safer assets. This is primarily due to the fall of the U.S. dollar.
The recent change from the Federal Reserve toward easing monetary policy and the expectation of further rate cuts for this year has taken some strength away from the dollar.
At the same time, the geopolitical conflicts in the Middle East contribute to their influence because investors have sought refuge during such a period of growing uncertainty in gold.
Looking ahead, attention will be riveted towards the U.S. Purchasing Managers Index PMI data, due later in the session. An upbeat reading than consensus may help the dollar make partial recovery, weighing on gold prices.
Gold price is looking to build on its two-day uptrend in Asian trades on Monday even as the #USD attempts a tepid recovery alongside the US Treasury bond yields in the run-up to the global preliminary business #PMI data.#Xauusdgold pic.twitter.com/BlTRgepJWm
— Natasha Johnson (@NatashaJohnfx) September 23, 2024
Impact of Fed Rate Cuts on Gold
The surprise decision of the Federal Reserve to cut interest rates by 50 basis points has made gold more attractive. Gold does not pay any interest, and when rates decrease, it tends to look relatively more attractive to investors. This has bolstered demand.
Not everyone at the Fed agreed with the move, however. Some officials, such as President Patrick Harker of the Federal Reserve Bank of Philadelphia, feel that the Fed managed the situation well. Others, like Governor Michelle Bowman, were more tame. She felt the initial rate cut should have been smaller because inflation is still an issue.
Another Fed official, Christopher Waller, says further cuts may be on hold, depending on future data related to the economy. While the rate cuts are usually beneficial for gold, the optimistic view that the Fed has for the growth of the U.S. economy may cap further gains.
In fact, the Fed forecast yearly growth of about 2% through 2027, representing steady recovery. This resilience in the air would likely reduce demand for gold since the safe-haven appeal becomes less critical.
Eyes on PMI Data 👀
Upcoming Eurozone and US Manufacturing and Services PMI data will be crucial. A weak PMI could spark recession fears, boosting safe-haven demand for the US Dollar—putting pressure on Gold prices.
— Zed_Fx📈🚀 (@Dollar_bill_KE) September 23, 2024
Gold: The Technical Picture versus Geopolitical Concerns
Speaking technically, gold is seen pegging near the key resistance of $2,630. A successful move above this could open up further doors above and expose gold to higher levels, with the next targets at $2,639 and $2,648, respectively. Failure to perform so might drop prices to lower levels toward $2,609 or even more.
This also raises some concern over an overbought condition after gold, with the RSI already at 71 showing an impending short-term correction. The 50-day EMA for the mentioned metal is currently standing at $2,585, showing very solid support. Any pullbacks could thus be viewed as earning buying opportunities.
To put it in a nutshell, the resistance of $2,630 would be the level that traders should continue to watch, and overbought conditions should be avoided. A higher breakout is likely to ensure further upside, while a sell-off below $2,614 could be considered a correction. As always, the bottom line would depend upon the broader economic outlook and geopolitical events.
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