Gold Prices Forecast: Powell’s Testimony Poised to Sway Market Direction

Gold Prices Rise as Markets Await Powell’s Testimony

Gold prices increased slightly on Tuesday, recovering from Monday’s losses. Traders are positioning cautiously ahead of Federal Reserve Chair Jerome Powell’s Congressional testimony and Thursday’s Consumer Price Index (CPI) report. The precious metal remains supported by its 50-day moving average, indicating underlying strength in the market.

At 10:41 GMT, XAU/USD is trading $2370.20, up $6.70 or +0.28%.

Powell’s Testimony in Focus

Powell is set to speak before the Senate on Tuesday and the House on Wednesday. His comments will be examined closely for clues about the Fed’s stance on interest rates. Any unexpected dovish remarks could push gold prices closer to the $2,400 level. Conversely, a hawkish tone might lead to a pullback in the gold market.

Market Expectations for Rate Cuts

Traders currently anticipate a 77% chance of a rate cut in September, up from 66% a week ago, according to CME Group’s FedWatch Tool. This change in expectations follows Friday’s jobs report, which showed U.S. unemployment rising to 4.1%. The increasing likelihood of rate cuts typically supports gold prices, as lower interest rates reduce the opportunity cost of holding non-yielding assets like gold.

Inflation Data on the Horizon

Thursday’s CPI data will be another crucial factor influencing gold prices. Recent figures have shown inflation cooling from earlier highs this year. However, if the data reveals persistent inflation, it could cause gold to give up some of its recent gains. Traders will be watching for any signs that might influence the Fed’s decision-making process regarding future rate adjustments.

Physical Demand and Price Projections

While physical gold demand likely decreased in the second quarter, analysts at Citi expect a rebound towards year-end. They project spot prices could reach $2,400-$2,600 in the second half of 2024, driven by positive consumption growth and increased financial investor interest. This long-term outlook suggests potential upside for gold prices beyond the immediate market reactions to Powell’s testimony and inflation data.

Global Economic Factors

The gold market is also influenced by broader economic factors, including global trade tensions, geopolitical risks, and currency movements. These elements contribute to gold’s appeal as a safe-haven asset during times of uncertainty.

Market Forecast

The short-term outlook for gold remains cautiously bullish. Powell’s testimony and the upcoming CPI data are key events that could move prices significantly. If Powell adopts a more dovish tone and inflation data aligns with expectations of continued cooling, gold could see a strong upward move. However, traders should remain alert, as any hawkish surprises could quickly reverse this trend. The relationship between interest rate expectations, inflation concerns, and global economic uncertainties will likely keep the gold market active in the coming weeks.

Technical Analysis

XAU/USD will be poised to move higher as long as it can hold above the 50-day moving average at $2342.21. Taking out last week’s high at $2392.97 will signal a resumption of the uptrend. If this move creates enough upside momentum then look for the rally to extend into $2450.13 over the near-term.

A failure to hold the 50-day moving average won’t be a complete disaster because of triple-bottom support at $2293.69, $2286.83 and $2277.34.