Gold Price Forecast: XAU Traders Struggle as Dollar Soars, Bond Yields Climb

Highlights

• Gold under pressure due to robust dollar and rising bond yields.
• U.S. jobs data and Fed policy sway market sentiment.
• Safe-haven seekers shift from gold to the U.S. dollar.

Overview

Gold’s (XAU) shine dulled in the face of a robust dollar and climbing bond yields, leading the precious metal to teeter near a three-week low. Investors held their breath, awaiting the unveiling of July’s U.S. nonfarm payrolls data. With U.S. gold futures also settling slightly lower, Thursday proved to be a day of caution.

Dollar’s Rise Pressures Gold Prices

The U.S. dollar took center stage, leaping to a four-week high. This upswing made gold more expensive for those dealing in other currencies. At the same time, yields on U.S. 10-year Treasury bonds scaled their highest point since last November. A stronger dollar and heightened bond yields put pressure on gold, pushing prices towards a potential dip to the $1,914.00 – $1902.00 area.

US Jobs Data Stir Markets

Recent economic data has stirred up the markets, leading to a heightened focus on U.S. jobs numbers. Notably, data showed a stronger-than-expected increase in U.S. private payrolls for July, an encouraging sign of continued labor market resilience. With this background, the Federal Reserve’s policy stance could hinge on the forthcoming U.S. jobs report. However, the upward tick in the number of Americans filing for unemployment benefits adds a wrinkle to the narrative.

Gold Struggles Amid Global Financial Shifts

While this dynamic played out, a few factors further affected the yellow metal’s performance. The Bank of England raised its key interest rate to a 15-year peak, adding more fuel to the bond yield’s rise. Furthermore, Fitch’s downgrade of the U.S. credit rating failed to spur a rally in gold prices, leading to some redemptions in gold exchange-traded funds (ETFs). Traditional wisdom took a hit as investors, instead of flocking towards gold, shifted their investments to the safe-haven U.S. dollar, driving Treasury yields even higher.

Short-Term Outlook

In the short term, a bearish outlook clouds the horizon for gold. Factors such as the strong dollar, rising bond yields, and potential Fed policy adjustments, combined with investor behavior towards risk and safe-haven assets, suggest gold prices may be under pressure. However, gold’s lower bounds may find solid support as markets approach the end of the rate-hiking cycle.

Technical Analysis

The gold (XAU) market is showing short-term bearish sentiment. The current price is below both the 200-4H and 50-4H moving averages, indicating a strong downtrend. Furthermore, a below-neutral 14-4H RSI of 39.18 indicates weaker momentum. However, nearing oversold conditions could suggest an upcoming market reversal. With support at 1914.00 to 1902.75, the charts indicate there is plenty of room to the downside. Look term buyers may find this area attractive especially if the market becomes oversold.