Gold Price Forecast: Higher Amidst Weaker Dollar, Fed Anticipation

Highlights

• Gold gains momentum on weaker dollar ahead of Fed rate hike decision.
• Experts predict steady gold above $1,950 with potential short-covering retracement today.
• Attention fixed on Fed Chair Powell and ECB President Lagarde’s statements.

Overview

Comex Gold prices gained momentum on Tuesday, spurred by a weakened dollar, while traders keenly anticipated a highly awaited rate hike decision from the U.S. Federal Reserve, coupled with hints on future monetary policies. The dollar index slightly receded from its two-week high, offering support to gold as the more affordable bullion for buyers holding other currencies.

Despite a recent four-day dip, experts predict that gold will likely hold steady above $1,950 and make strides towards a technically-driven retracement between $1,960 and $1,965 today. However, the market eagerly awaits the conclusion of the Federal Open Market Committee (FOMC) meeting for more definitive movements.

Market attention is firmly fixed on the forthcoming statements from Fed Chair Jerome Powell on Wednesday and European Central Bank President Christine Lagarde on Thursday. Their insights on the monetary policy outlook for their respective September meetings will influence gold’s trajectory.

Given its nature, gold remains acutely sensitive to rising interest rates, which inherently increase the opportunity cost of holding non-yielding bullion.

Recent data from Monday indicated a slowdown in business activity in both the U.S. and Europe during July, suggesting that both central banks could be nearing the end of their rate-hike cycles.

Traders are currently anticipating the Fed to maintain interest rates within the range of 5.25% to 5.5% until 2024, according to CME’s Fedwatch tool.

For gold to achieve record highs, the most favorable scenario would involve the Fed announcing an end to their tightening cycle without a looming recession.

Shifting our focus to China, the country experienced a significant 16.37% year-on-year increase in gold consumption, with production from gold enterprises returning to normal during the first half of 2023. Additionally, China’s major state-owned banks were observed selling dollars to buy yuan in both onshore and offshore spot markets, providing support to the currency. This move came after leaders pledged to enhance policy support for the economy.

As the market closely monitors monetary policies, gold remains an asset to watch attentively. Traders are advised to pay heed to the statements from central bank leaders and any indications of a shift in interest rate policies, as these factors can significantly impact gold’s short-term forecast, potentially leading it to bullish or bearish movements.

Technical Analysis

Comex Gold showed a slight bearish move as its current 4-hour price of 1962.80 dipped below yesterday’s close of 1964.10. However, the market remains bearish in the short term, with the price below the 50-4H (1968.0) but comfortably above both the 200-4H (1949.50). The 14-4H RSI at 45.17 suggests weaker momentum but not yet in oversold territory.

The price held a test of the main support area of 1949.00 to 1954.60. Traders should closely monitor this area for potential shifts.