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Gold Prices Forecast: Choppy Trade Expected Ahead of CPI, PPI Reports

By:
James Hyerczyk
Published: Jan 9, 2024, 07:39 GMT+00:00

Gold (XAU/USD) rises modestly amid U.S. Treasury yield shifts and speculation on Fed rate cuts, with a cautious uptrend forecast.

Gold Prices Forecast

In this article:

Key Points

  • XAU/USD prices rise despite higher U.S. Treasury yields
  • NY Fed report influences gold market sentiment
  • Gold’s uptrend tempered by rate cut uncertainties

Market Movement Amidst Economic Indicators

Gold (XAU/USD) is experiencing a modest rise in early Tuesday trading, despite an uptick in U.S. Treasury yields and a stabilizing U.S. Dollar. The market remains cautious with many investors on the sidelines, awaiting key economic data releases later this week, including the U.S. CPI and PPI reports.

Influence of U.S. Economic Reports

Tuesday’s boost in gold prices follows a recent U.S. report indicating consumer expectations of lower inflation, fueling speculation about potential Fed rate cuts. However, gains are tempered by slight rises in yields and the dollar. The NY Fed’s survey suggesting lowered inflation and spending expectations further supports gold prices, potentially influencing the Fed’s rate cut considerations for 2024.

Balancing Factors in Gold Market

Gold prices must navigate between a dovish rate outlook and potential safe-haven outflows. Recent strong jobs data and Fed minutes expressing uncertainty over rate cut timings add complexity to the market’s outlook. Current market sentiment reflects a 62% chance of a Fed rate cut in March, a significant decrease from previous expectations.

Short-Term Forecast

Given the current market conditions, including the U.S. economic data and Federal Reserve policies, gold prices are expected to maintain a cautious uptrend. The market is closely monitoring U.S. Treasury yields and awaiting further clarity from upcoming inflation reports. This cautious optimism is underpinned by the Federal Reserve’s recent policy stances and economic indicators, suggesting a potential easing of rates in the near future.

Technical Analysis

Daily Gold (XAG/USD)

Gold (XAU/USD) currently trades at 2036.87, positioned above both the 200-day and 50-day moving averages, set at 1962.62 and 2012.24 respectively. This positioning above key moving averages indicates a bullish trend.

The proximity of the current price to the minor support level at 2009.00, closely aligned with the 50-day moving average, forms a potential support cluster, suggesting a strong likelihood of buyer interest around this zone. If this support holds, it could reinforce the bullish sentiment. However, a break below this level might indicate increasing selling pressure, with the 200-day moving average at 1962.62 as the next potential target.

The market’s current status above these moving averages, coupled with the proximity to a support cluster, primarily signals a bullish outlook, but the potential for a shift exists if key support levels are breached.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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