Gold Prices Forecast: 93% Chance of September Fed Rate Cut Boosts XAU/USD

Gold Edges Higher as Market Hovers Near Resistance

Gold prices are inching upward on Monday after reversing earlier gains, with the precious metal testing resistance near recent highs. Traders are closely monitoring U.S. Treasury yields and dollar movements while awaiting comments from Federal Reserve officials and crucial economic data.

At 11:21 GMT, XAU/USD is trading $2418.26, up $7.34 or +0.30%.

Market Forces and Political Factors

The dollar’s strength, bolstered by safety bids following an attempted assassination of former U.S. President Donald Trump, is creating headwinds for gold. A robust dollar typically makes gold more expensive for foreign buyers. However, the impact of potential political outcomes on gold remains uncertain, with analysts suggesting that renewed trade tensions could benefit the metal.

Fed Watch and Economic Indicators

Investors are eagerly anticipating remarks from Fed Chair Jerome Powell and other officials this week. Key economic releases, including U.S. retail sales, industrial output for June, and weekly jobless claims, will be scrutinized for clues about the Fed’s future rate decisions. Ilya Spivak, head of global macro at Tastylive, notes that a significant miss in retail sales could reinforce expectations for rate cuts, potentially supporting gold prices.

Interest Rate Expectations

The CME Fedwatch Tool indicates a 93% probability of a Fed rate cut in September, which could boost gold’s appeal. Non-yielding bullion typically benefits from lower interest rate environments. U.S. Treasury yields remain mixed, reflecting investor uncertainty about the economic outlook and monetary policy direction.

Global Economic Considerations

China’s economic slowdown in the second quarter has fueled expectations for additional stimulus measures, which could impact gold demand from this key metals consumer.

Market Forecast

The short-term outlook for gold appears cautiously bullish, despite hovering near resistance levels. The critical level to watch is $2,450, with a breakthrough potentially leading to new record highs. However, gold must first overcome the recent high of $2,424.50 and the double-top formation at $2,431.59 to $2,450.13. This resistance zone is crucial for determining gold’s next significant move.

Upcoming Fed comments and economic data releases will likely be pivotal in shaping gold’s direction. If retail sales data disappoints, it could strengthen the case for rate cuts and provide support for gold prices. Traders should remain vigilant, as the interplay between economic indicators, Fed policy expectations, and geopolitical factors will continue to influence gold’s performance in the near term.

Technical Indicators

XAU/USD is rebounding on Monday after early session weakness. The price action suggests intraday investors are gathering the momentum needed to continue last week’s rally with their eyes set on the bullish trigger point at $2424.60. The potential target is $2450.13, the May 20 main top.

The key support is the 50-day moving average at $2359.55. This indicator is controlling the intermediate trend. Despite the market’s strength, the distance between the current price and the moving average, makes the market vulnerable to the downside should the fundamentals change.