Gold Prices Forecast: Powell’s Remarks Boost Investor Sentiment

Gold Prices Surge as Fed Signals Potential Rate Cut

Gold prices climbed on Tuesday, approaching the record high of $2,449.89 set on May 20. This upward movement comes in response to comments from Federal Reserve Chair Jerome Powell, which have strengthened the case for a September rate cut.

At 11:38 GMT, XAU/USD is trading $2440.42, up $18.03 or +0.74%.

Powell’s Remarks Boost Gold

During a speech at the Economic Club of Washington D.C., Powell indicated that the Fed would not wait for inflation to reach 2% before considering rate cuts. He emphasized the importance of acting proactively due to the lag in policy effects. Powell’s comments have increased investor confidence in potential rate cuts, driving gold prices higher.

Inflation Data and Economic Outlook

Recent inflation data has shown signs of cooling, with the June Consumer Price Index report indicating a month-over-month decrease in prices. Powell expressed optimism about the economic outlook, stating that a “hard landing” for the U.S. economy was unlikely. These factors contribute to the bullish sentiment in the gold market.

Central Bank Purchases and ETF Inflows

While central bank gold purchases have slowed in recent months, particularly due to reduced buying from China, global gold exchange-traded funds (ETFs) have seen a resurgence in demand. The World Gold Council reported inflows of $0.5 billion, or 7.6 metric tons, into gold ETFs last week. This renewed interest from institutional investors supports the current upward trend in gold prices.

Market Forecast

The outlook for gold remains bullish in the short term, despite being overvalued by 7% at the end of June. The anticipation of upcoming U.S. rate cuts is likely to drive prices higher, potentially leading to new record highs. However, investors should be prepared for potential volatility in the third quarter as markets await concrete signals from the Federal Reserve.

Traders are advised to closely monitor upcoming U.S. economic data, particularly the retail sales figures due later today, for further insights into the Fed’s potential policy decisions and their impact on gold prices.

Technical Analysis

XAU/USD is showing strong bullish momentum, with trend traders looking to push prices to record highs. The buying has been controlled to avoid an overbought scenario. Key support is at the 50-day moving average of $2,352.11, and the market is staying just above this level, preventing it from overheating.