Gold (XAU) Daily Forecast: Safe Haven Boost Gold Demand, Buy Above $2318?

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Published: May 7, 2024, 07:07 GMT+00:00

Key Points:

Dollar's Decline Boosts Gold: Weakening U.S. dollar and soft payroll data propel gold prices upward, raising speculation on Fed rate cuts.
Gold Prices Stabilize Amid Risk Shift: Despite an uptick, gold's rise moderated as investors turned to riskier assets post-payroll announcement.
Fed Speeches to Shape Outlook: Upcoming Federal Reserve official speeches anticipated to clarify future U.S. interest rate directions, impacting gold forecasts.

Gold (XAU) Daily Forecast: Safe Haven Boost Gold Demand, Buy Above $2318?

Market Overview

Gold prices experienced a modest uptick, a response largely attributed to a weakening U.S. dollar following unexpectedly soft U.S. payroll data. This shift increased speculation among traders that the Federal Reserve might lower interest rates in the foreseeable future.

Impact of U.S. Economic Data on Gold Prices

Despite the initial rise, gold’s gains were tempered as investors shifted their focus towards riskier assets, spurred by the same nonfarm payroll figures. Gold futures for June delivery also mirrored this rise, climbing 0.4% to reach $2,318.70 per ounce.

In recent weeks, gold prices have retracted from their record highs, burdened by persistent concerns over prolonged high interest rates and diminishing demand for safe-haven assets.

Dollar Weakness Supports Gold Recovery

The yellow metal found some respite last week as the dollar dropped by 0.8%, largely driven by the payroll data, which fueled anticipations of a Fed rate cut by September. While a cooling labour market could justify a rate cut, ongoing concerns about inflation, which has surged past the Fed’s 2% annual target, complicate the Fed’s rate decision strategy.

Upcoming Federal Reserve Speeches

Attention now turns to upcoming speeches from Federal Reserve officials, expected to provide further insights into the U.S. interest rate trajectory. On Tuesday, however, gold’s recovery momentum faltered as the U.S. dollar regained strength.

The latest payroll data, indicating a slowdown in U.S. job growth and a reduction in annual wage increases, continues to support the scenario of forthcoming rate cuts. This expectation could potentially reduce the cost of gold for international buyers, thereby lifting demand.

Geopolitical Tensions and Safe-Haven Demand:

Meanwhile, ongoing political tensions in the Middle East are likely to bolster demand for gold as a safe haven. Statements from Federal Reserve officials like Neel Kashkari and Thomas Barkin, who have commented on inflation and the labour market, suggest a cautious approach to any changes in the rate policy.

New York Fed President John Williams also hinted at eventual rate reductions, emphasizing a comprehensive assessment of economic data. The market has factored in potential rate cuts totalling 46 basis points by the end of 2024, with anticipations of the initial cut possibly occurring between September and November.

These developments come as geopolitical unrest continues in the Middle East, with Israel rejecting a ceasefire proposal that did not meet its requirements, continuing its military operations in Gaza.

XAU/USD Trends

Gold has climbed approximately 12% this year, navigating through an environment of high inflation and uncertainty regarding the timing of the Fed’s rate cuts. This resilience highlights gold’s enduring appeal as a hedge against economic instability.

In conclusion, the gold market remains at the mercy of fluctuating U.S. economic indicators, Federal Reserve policy shifts, and global geopolitical events, each capable of significantly swaying the price of gold in the short to medium term.

Gold Prices Forecast

GOLD Price Chart

Gold (XAU/USD) is marginally higher today, registering a modest 0.02% increase to $2320.30. The metal is trading slightly above its pivot point of $2318.64, which suggests a delicate balance in market sentiment.

Immediate resistance is found at $2336.20, with further barriers at $2351.65 and $2369.37 that could cap upward movements. On the downside, gold has support at $2294.59, followed by $2277.60 and $2260.34, levels that could provide stability in case of a downturn.

The 50-Day and 200-Day Exponential Moving Averages, at $2313.87 and $2318.78 respectively, indicate a neutral to slightly bullish outlook. A sustained move above $2318 could strengthen bullish sentiments, while a drop below might trigger a sharper sell-off.

About the Author

Arslan Aliauthor

Arslan, a webinar speaker and derivatives analyst, has an MBA in Finance and MPhil in Behavioral Finance. He guides financial analysis, trading, and cryptocurrency forecasting. Expert in trading psychology and sentiment.