Gold Price Forecast: Resurgent Dollar, US Inflation Fears Dampen XAU’s Shine

Highlights

• Gold prices drop, influenced by stronger dollar.
• U.S. inflation data impacts gold’s trajectory.
• China’s trade woes affect gold consumption.

Overview

Gold (XAU) prices slid marginally on Tuesday, influenced by a resurgent dollar and mounting anticipation over U.S. inflation data set to release later this week. As of 05:51 GMT, spot gold dipped by 0.1% to $1,934.26 an ounce. Concurrently, U.S. gold futures remained unchanged, positioned at $1,968.80. The dollar’s 0.2% surge against major counterparts rendered gold pricier for foreign purchasers.

US Inflation Trajectory in Focus

Central to investors’ focus this week is the U.S. inflation trajectory. While the market is aware that headline inflation is on a decline, the core inflation figures remain a significant point of contemplation for the Federal Reserve. Any pronounced solidity in this data might propel gold’s prices further downwards. Furthermore, should the Consumer Price Index (CPI) figures exceed expectations on Thursday, it might fuel speculations of another interest rate increment during the Federal Reserve’s September rendezvous. Elevated interest rates often bolster bond yields, in turn increasing the cost of holding non-yielding assets like gold.

Fed Member Comments, China Trade Weigh

Recent downturns in gold prices also owe to remarks by Fed Governor Michelle Bowman, suggesting the necessity of more rate hikes to pull inflation closer to the Federal Reserve’s 2% aspiration. Simultaneously, trade data released showcased a 14.5% year-on-year plunge in China’s July exports, with imports shrinking by 12.4%. Notably, this marks China’s most substantial drop in exports since February 2020, a country also recognized as gold’s most significant consumer.

Gold ETF Demand Falls

In further testament to the prevailing investor mood, the SPDR Gold Trust, the globe’s principal gold-backed exchange-traded fund, experienced a 0.3% contraction on Monday.

Short-Term Outlook: Bearish Ahead of CPI Report

In the short-term, gold’s trajectory seems bearish. The combination of potential rate hikes, U.S. inflation outcomes, and the financial environment in major gold-consuming nations may apply further downward pressure on the precious metal.

Technical Analysis

Gold’s (XAU) current 4-hour price of 1933.42 is slightly below its previous 4-hour price of 1934.48, indicating a minor dip. The price is currently below both the 200-4H moving average of 1940.97 and the 50-4H moving average of 1946.83. This suggests a short-term bearish momentum, as it is trading under the significant moving averages. The 14-4H RSI stands at 41.08, suggesting weakened momentum, being below the neutral 50 mark.

Furthermore, the current price is hovering above the main support area ranging from 1914.00 to 1902.75 but is below the main resistance area of 1979.00 to 1987.53. Taking all these indicators into account, the market sentiment for Gold on a 4-hour chart appears bearish.