Gold Price Forecast: Traders Eye 3rd Weekly Gain on Fed Rate Pause Expectations

Highlights

• Comex gold set for third consecutive weekly gain.
• Economists expect 25-basis point hike during July Fed meeting.
• Real interest rates could limit gold’s short-term upside potential.

Overview

Comex Gold prices are on track for a third consecutive weekly gain, boosted by expectations that the U.S. Federal Reserve will halt interest rate hikes after their upcoming July meeting. However, the metal experienced a slight setback on Thursday as the dollar and bond yields rose due to robust U.S. labor market data.

The rise in gold prices has been supported by the anticipation that the Fed will implement its final rate increase in the current tightening cycle. Economists polled by Reuters expect a 25-basis point hike during the Fed meeting on July 25-26. Lower interest rates make holding zero-yielding bullion more attractive for investors.

Despite the positive sentiment, real interest rates could limit gold’s upside potential in the short- to medium-term, especially without a major risk event taking place. The metal seems to be trading with froth, meaning it may be prone to volatility without significant market triggers.

While the dollar index (DXY) experienced a slight decline of 0.1%, it was still headed for a weekly rise, and U.S. Treasury yields were higher. China’s foreign exchange regulator asserted its commitment to maintain a stable yuan at balanced levels and avoid sharp volatilities in the yuan exchange rate.

Looking ahead, market participants will closely monitor the Bank of Japan meeting for potential policy adjustments. Additionally, economists in a Reuters poll predict the European Central Bank to raise interest rates by 25 basis points.

Short-Term Outlook:  Cautiously Bullish

In conclusion, gold prices are showing resilience with the possibility of a third consecutive weekly gain as traders anticipate a pause in interest rate hikes by the Federal Reserve. However, the metal may face short-term limitations without significant risk events. Investors will closely observe central bank meetings and currency developments for further market direction.

Technical Analysis

Comex Gold is exhibiting cautiously bullish sentiment as the current 4-hour price edges higher at $1973.00, slightly above the previous 4-hour close at $1971.40. The market shows positive momentum, trading above both the 200-4H and 50-4H moving averages at $1950.20 and $1964.50, respectively. The 14-4H RSI reading of 51.50 suggests a balanced momentum, supporting the mildly stronger sentiment.

However, the current price nearing the main resistance area of $1980.00 to $2000.50 indicates potential resistance to further gains. Traders closely watch for a breakthrough of this resistance level to sustain the bullish momentum in the market.  If there is no upside breakout then look for a test of the moving averages. The market will be vulnerable to the downside if the 200-hour moving average at $1950.20 fails as support.