Gold Prices Forecast: Fed Rate Pause Hopes Boosts XAU/USD Momentum

Highlights

• Gold approaches a one-month high, driven by a receding dollar and Fed rate hike speculations.
• U.S. job growth spikes in August, but a 3.8% unemployment rate tempers bullish sentiments.
• A collection of economic metrics hints at a U.S. economy in deceleration, not freefall.

Dollar Dips, Fed Pause on Rates Props Gold Prices Higher

Gold prices are edging towards a one-month peak, lifted by a pullback in the dollar and mounting speculation that the U.S. Federal Reserve will forego interest rate hikes this month. Spot gold rose 0.22% to $1,944.90 per ounce, while U.S. gold futures showed similar upward momentum. The market’s trading within the scope of last Friday’s wide range suggests looming volatility.

Trader Sentiment and Labor Market

Friday’s U.S. employment data indicated a spike in job growth for August, but this was offset by a jump in the unemployment rate to 3.8% and a moderation in wage gains. This mixed bag has only strengthened the argument for a Fed pause in interest rate hikes, as evidenced by the 93% probability reflected in the CME FedWatch tool.

Economy: Cooling but Not Collapsing

The collection of economic indicators pointing to moderating inflation and an easing labor market has bolstered the belief that the U.S. economy is on track for a soft landing. An interest rate pause by the Fed would likely keep the dollar weak, further supporting gold prices.

What the Yields and Feds Say

With gold’s value often moving inversely to interest rates, traders are closely monitoring Treasury yields as a significant determinant of gold’s future price. Upcoming speeches from at least seven Fed officials this week are anticipated to provide insights into the next policy meeting slated for September 19-20.

Bullish Outlook Rooted in Technicals

On a technical note, gold’s prospects seem increasingly positive. The metal has been trading above its 50-day moving average for four successive sessions, establishing a new support level at $1,930. Coupled with the expected pause in interest rate hikes, this paints a cautiously bullish short-term outlook for the precious metal.

Technical Analysis

Gold (XAU/USD) is exhibiting interesting dynamics on its 4-hour chart. The current trading price stands at 1943.95, reflecting a marginal dip from its prior 4-hour position at 1945.15. However, it remains notable that this price situates itself above both the 200-4H moving average (1932.75) and the 50-4H moving average (1927.87), suggesting a bullish inclination in the short term. The 14-4H RSI indicator, resting at 58.43, further echoes this sentiment.

Positioned above the neutral mark of 50, it hints at stronger market momentum. Moreover, while the price navigates closer to the main resistance area spanning from 1946.99 to 1954.88, it retains a safe distance from the principal support zone, which stretches between 1893.07 and 1885.79. Analyzing these factors collectively, the current market sentiment for Gold leans towards the bullish side.