Gold Price Forecast: XAU Traders Face Uncertainty Ahead of US Interest Rate Decision

Gold (XAU) Highlights

• Gold prices retreat as dollar strengthens before US inflation data
• Safe-haven gold on track for 2nd monthly gain due to economic concerns
• Interest rate hike weighs on gold, but banking crisis could boost prices

Gold (XAU) Overview

On Friday, gold (XAU) prices retreated as the U.S. dollar strengthened in anticipation of U.S. inflation data. Despite this, concerns about the economy kept safe-haven gold on track for a second consecutive monthly gain.

At 10:15 GMT, Gold (XAU) is trading $1983.74, down $3.245 or -0.16%. On Thursday, the SPDR Gold Shares ETF (GLD) ETF settled at $184.73, down $0.01 or -0.01%.

Gold Prices Supported by Safe-Haven Trade

Although the possibility of another interest rate hike is weighing on gold, the metal has been supported this month by the weakened dollar and the “safe-haven trade” resulting from fears of an economic downturn and ongoing turbulence in the American banking sector.

However, a sudden worsening of the banking sector crisis could prompt a rush to safe-havens, which is likely to boost gold prices beyond previous records. In mid-April, gold reached a one-year high of $2,048.71 as the banking crisis unfolded.

Monthly Dollar Decline Makes Gold Affordable

Although the dollar inched up for the day, it was headed for a monthly decline, making gold more affordable for overseas buyers. The focus of investors is now on the U.S. core Personal Consumption Expenditures index data for March, which is due at 12:30 GMT.

Gold (XAU) Investors Hope for Rate Hike Pause

The U.S. Federal Reserve is expected to increase interest rates by 25 basis points on May 2-3. Elevated rates dampen the appeal of zero-yielding bullion. Gold investors are hoping that the Fed is nearing the end of this current cycle of rate hikes.

Gold (XAU) Trading Stable Amid Uncertainty

If that does prove to be the case, gold has sufficient support to keep it trading in the high $1,900s for the foreseeable future while hints of further hikes needed may push it back down towards $1,900. Additionally, developments regarding the U.S. debt ceiling are also being monitored.

Technical Analysis

Based on the technical analysis, the long-term trend is upward, while the short-term trend is neutral. Consequently, the price is hovering around the midpoint of R1 at $2045.30 and PIVOT at $1927.36, settling at $1986.33. This uncertainty suggests that investors anticipate a possible surge in volatility.

Investors are probably waiting for fresh news to make a significant move. Currently, there are two options available in the gold market: wait for a breach of the support PIVOT at $1927.36 or bet on a breakout above R1 at $2045.30.

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