Gold Price Forecast: Testing Nine-Week High on Fed Rate Pause Speculation

Highlights

• Gold prices reach near nine-week high driven by weaker dollar and potential Fed rate pause.
• Lower interest rates benefit gold as opportunity cost declines.
• U.S. jobless claims data and global uncertainties influence short-term gold movement.

Overview

Comex Gold prices reached a near nine-week high on Thursday, driven by a weaker dollar and expectations that the U.S. Federal Reserve may pause its interest rate hikes. The declining dollar index, hovering close to a one-year low, made gold more affordable for holders of other currencies.

Fed to Hike 25 Basis Points While Traders Await Decision on Further Moves

Investors are anticipating a 25 basis points rate hike at the upcoming Fed meeting, maintaining rates within the 5.25%-5.5% range in 2023, according to CME’s FedWatch tool. While the possibility of a rate cut in 2023 seems unlikely, lower interest rates generally benefit gold as they reduce the opportunity cost of holding the non-yielding asset.

Flat to Higher Jobless Claims Could Spur Rally

In addition to monetary policy factors, investors are also keeping an eye on the upcoming U.S. jobless claims data for the week of July 15. Forecasts suggest a rise to 242,000 from the previous 237,000 claims. The market has observed an increase in jobless claims over the second quarter, and a sideways movement is expected. If jobless claims remain flat or rise further, it could potentially drive a positive movement in gold prices.

Short-Term Outlook:  Bullish but Fed Dependent

The current market conditions have been supportive for gold, with the weakening dollar and lower-than-expected inflation prints providing additional momentum. As investors assess the Fed’s rate hike decisions and the employment data, gold remains an attractive investment option due to its safe-haven appeal and potential for hedging against inflationary pressures.

In conclusion, gold prices have surged to a near nine-week high, benefiting from a weaker dollar and market expectations of a potential pause in the Fed’s interest rate hiking cycle. Lower interest rates and the upcoming U.S. jobless claims data are important factors to watch as they can influence the short-term movement of gold prices. With the current environment favoring gold and ongoing uncertainties in the global economy, investors are likely to closely monitor these factors to determine whether the bullish trend will continue in the near term.

Technical Analysis

Comex Gold sentiment is slightly positive, trading at the current 4-hour price of 1984.00, slightly higher than the previous close. The price is trading above both the 200-4H and 50-4H moving averages, indicating strength and a solid uptrend. The 14-4H RSI reading of 66.51 suggests increasing momentum.

Overall, the market outlook is bullish for gold. However, the market is nearing overbought terrritory per the RSI. It is also trading inside the main resistance area of 1980.00 to 2000.50. This means traders need to approach new buying with caution.