Gold Price Forecast: XAU Eyes CPI Data as Potential Catalyst for Fed Rate Moves

Highlights

• Spot gold maintains near one-month low.
• Inflation data could influence Fed’s rate decisions.
• Geopolitical tensions bolster bullion’s foundation.

Overview

Gold (XAU) prices remain subdued as investors eagerly anticipate the forthcoming U.S. inflation data, which stands to greatly influence the Federal Reserve’s stance on interest rates.

Spot gold, as of early morning GMT, saw a minor dip of 0.045%, marking a continuity of its near one-month low trend. With U.S. gold futures pegged lower at $1949.20, the market’s attention is riveted to the release of the U.S. consumer price index (CPI) later today, with expectations hinting at a possible slight acceleration in inflation for July.

Cleveland Fed Predicts Assertive CPI Rise

While the Dow Jones consensus estimate projects a modest 0.2% uptick in the CPI for July, the Cleveland Federal Reserve’s Inflation Nowcast model foresees a more assertive 0.4% increase. A primary concern for investors is the core of the U.S. headline. A greater-than-predicted downtrend could strengthen the disinflation trend, offering a much-needed boost for gold, conventionally viewed as an inflationary hedge. However, it’s worth noting that impending rate hikes could diminish the appeal of non-yielding bullion for potential investors.

Traders Not Expecting Fed Rate Hike in September

Current trader sentiment suggests a high probability against a rate hike in the upcoming Fed meeting scheduled for September. Instead, the prevalent expectation leans towards the next significant Fed move being a rate cut, potentially rolling out in the spring of 2024. This shift could rejuvenate gold’s market appeal, contingent on the solidity of the disinflation trend. This, combined with an anticipated U.S. dollar weakness, might restore gold’s allure for investors.

SPDR Gold Trust Holdings Dip

Conversely, SPDR Gold Trust, a major gold-backed exchange-traded fund, has reported a drop in its holdings, hitting its lowest since March. Yet, gold’s standing isn’t entirely bleak. The geopolitical landscape, especially the recent tensions exacerbated by U.S. President Joe Biden’s executive order limiting specific U.S. investments in China, serves as a foundational support for bullion in the volatile global economy.

Technical Analysis

Gold (XAU) is currently priced at 1917.98, a slight increment from the last 4-hour close of 1916.78. The metal is trading below both the 50-4H moving average of 1938.51 and the 200-4H moving average of 1941.03, suggesting a bearish sentiment in the short to medium term. The 14-4H RSI at 34.40 indicates weakening momentum and is nearing the oversold territory, suggesting potential buying opportunities ahead.

While the price resides just above the main support area of 1914.00 to 1902.75, it’s considerably below the main resistance zone between 1979.00 and 1987.53. Given these technical indicators, the immediate outlook for gold leans bearish, though potential rebounds could be in sight given the nearing oversold conditions.