Gold Price Forecast: XAU Traders Brace for Upcoming Economic Data Releases

Highlights

• Economic data releases to impact Fed interest rate policy
• Weak economic data may increase demand for gold
• Fed expected to raise interest rates; inflation concerns remain

Overview

On Wednesday, gold (XAU) prices remained confined to a tight range as traders prepared themselves for upcoming U.S. economic data that could provide insights into the Federal Reserve’s monetary policy stance.

At 10:10 GMT, Gold (XAU) is trading $1999.82, up $0.21 or +0.01%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $185.77, up $0.96 or +0.52%.

Economic Data Releases Impact Interest Rates

Investors and traders are paying close attention to upcoming economic data releases that could affect the Federal Reserve’s interest rate policy. On Wednesday, durable goods orders and mortgage sector data will be released, while on Thursday, the quarterly gross domestic product data will be released, and on Friday, the core PCE index will be released. These releases are important for investors as they try to determine the outlook for Federal Reserve interest rate policy.

Fed’s Tone Will Affect Gold Prices

Recent data, such as the Philadelphia Fed manufacturing index, has caused concerns about the economy contracting, leading to speculation about the tone the Fed will adopt in its upcoming meeting. If yields continue to weaken, this could be positive for gold, as long as it remains above $1,965. However, this depends on whether the Fed signals a pause in its decision next week.

Gold Prices Supported by Recession Fears

A correction in the dollar and a spike in gold prices could attract more safe-haven buying, with hopes that industrial demand will grow based on China’s growth outlook. However, U.S. consumer confidence has fallen to a nine-month low in April, with mounting worries about the future, heightening the risk of a recession later this year. The fear of a recession is already providing a floor for gold prices.

Gold’s Appeal May Decline Amidst Rising Interest Rates

Although gold is considered a safe investment during economic uncertainties and an inflation hedge, rising interest rates reduce the attraction of the non-yielding metal. Next week, investors expect the Fed to raise interest rates by 25 basis points and will look for indications of future rate cuts. Despite this, central bank officials have suggested that rates will remain elevated for some time to tackle inflation.

Technical Analysis

From a daily technical perspective, the longer-term trend is up, but the short-term trend is neutral. This is creating a sideways trade with the price action concentrated around the mid-point of R1 at $2045.30 and a PIVOT at $1927.36. This $1986.33.

The price action suggests investor indecision and impending volatility. This usually means investors are waiting for fresh news to drive the next major move.

The gold market is giving investors two choices at this time:  Wait for a break into the support PIVOT at $1927.36, or play for a breakout over R1 at $2045.30.

Support and Resistance Line:

For a look at all of today’s economic events, check out our economic calendar.