Gold Prices Forecast: Rising Ahead of GDP Data as Geopolitical Fears Intensify

Gold Edges Higher Ahead of Key U.S. Economic Data

Gold prices inched higher on Thursday as traders engaged in light short-covering ahead of crucial U.S. economic reports. The market also saw bargain-hunters stepping in after Wednesday’s sell-off failed to breach significant support levels, such as the June 7 low at $2286.83. Additionally, a weakening U.S. Dollar against a basket of major currencies provided further support for gold.

At 10:25 GMT, XAU/USD is trading $2313.26, up $14.79 or +0.64%.

Focus on U.S. Economic Reports

Market participants are closely awaiting Friday’s U.S. inflation data, which could influence the Federal Reserve’s next interest rate decision. However, before the inflation data, several key economic reports are due on Thursday. These include weekly jobless claims, durable goods orders, and pending home sales.

Economists predict that jobless claims for the week ending June 22 will increase to 240,000 from the previous week’s 238,000. Durable goods orders are expected to have declined by 0.6% in May, reversing the 0.6% increase seen in April. Pending home sales are anticipated to have risen by 1% in May, following a significant 7.7% decline in April.

Treasury Yields and Economic Outlook

U.S. Treasury yields rose on Thursday as investors scrutinized economic data for insights into the future of the economy and monetary policy. These reports come on the heels of data showing an 11% drop in new home sales in May. On Friday, the personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, is due. The Fed’s decisions on interest rates hinge significantly on inflation trends and whether they are sustainably moving towards the central bank’s 2% target.

Impact of Interest Rates on Gold

Fed Governor Michelle Bowman reiterated her stance that inflation would continue to decline if the policy rate remains steady. However, she also left the door open for additional rate hikes if progress on inflation stalls or reverses. Traders are currently pricing in a 62% chance of a rate cut in September, according to the CME FedWatch Tool.

Gold remains supported by a moderating U.S. dollar, with dips below the $2,300 level proving temporary since April. Nevertheless, if the Federal Reserve’s rate cut prospects diminish, gold bulls might struggle to maintain prices above this psychological threshold. Lower interest rates decrease the opportunity cost of holding non-yielding bullion, making gold more attractive.

Geopolitical Tensions and Gold Prices

Additionally, geopolitical tensions, particularly in the Middle East, where cross-border strains between Israel and Lebanon’s Hezbollah have been escalating, could further influence gold prices. The potential for an all-out conflict involving regional powers adds to the market’s uncertainty.

Market Forecast: Bullish Outlook for Gold

Given the current economic and geopolitical landscape, gold is expected to maintain a cautiously bullish outlook in the short term. However, the technical picture suggests vulnerability to the downside. Support from a weakening dollar, ongoing geopolitical tensions, and the potential for a dovish shift in Federal Reserve policy all contribute to this cautious optimism. Traders should monitor upcoming economic data and Fed communications closely to gauge future price movements, as any unexpected shifts could impact the bullish sentiment.

Technical Analysis

At first glance, XAU/USD looks like it’s poised to rollover to the downside if $2277.34 is taken out by high volume selling. However, we do have to give credit to “The Stopper”, who is defending the market around $2286.83, from a washout.

Nonetheless, there will be no rally unless buyers can retake the 50-day moving average at $2338.59.