Gold Prices Forecast: Underpinned by Geopolitical Risks, Ahead of Key Fed Decision

Highlights

• Gold stays above $2,000, fueled by Middle East unrest.
• Investors eye Fed’s upcoming policy meeting.
• Inflation concerns continue; rate hike looming, but timing a mystery.

Safe-Haven Appeal Pushes Gold Above $2,000

Gold (XAU/USD) prices remained resilient above the significant $2,000 mark, fueled by geopolitical tensions in the Middle East. Meanwhile, investors are treading carefully, awaiting the U.S. Federal Reserve’s forthcoming policy meeting. Spot gold saw a minor pullback, while December Comex gold futures edged higher.

Geopolitical Risks and Investor Sentiment

Israeli airstrikes on areas near Gaza have escalated conflict in the Middle East, pushing investors toward the safe-haven asset. Gold prices had previously surpassed the pivotal $2,000 threshold, marking the first time since mid-May. Amidst this uncertainty, market players are closely watching the U.S. central bank’s policy announcement this Wednesday, which could significantly impact gold prices.

Economic Data and Inflation Concerns

Recent U.S. economic indicators showed a surge in consumer spending, keeping monthly inflation warm. A Reuters poll suggested that rising inflation, which currently hovers above the Fed’s 2% target, remains a global economic risk into next year. While gold serves as an inflation hedge, an interest rate hike could curb its allure.

Central Bank Decisions and Interest Rates

Despite strong economic data, the Fed is likely to maintain its hawkish tone, particularly given ongoing Middle East tensions. Although experts predict an inevitable interest rate hike, all eyes are on the Fed for its timing. A rate increase could impact borrowing costs but also potentially boost returns on interest-earning assets.

Short-term Outlook: Cautiously Bullish

Gold prices seem to have found a stable floor above $2,000, primarily due to geopolitical risks and inflation concerns. However, the Fed’s upcoming policy meeting serves as a significant wild card. Should the central bank opt for an interest rate hike, the move could dampen gold’s shine. Nonetheless, in the short term, the outlook for gold remains cautiously bullish.

Technical Analysis

The current daily price of gold (XAU/USD) at $1997.41 is notably above both the 200-day moving average of $1932.94 and the 50-day moving average of $1914.98, signaling a bullish trend. However, it’s crucial to note that the asset has recently decreased from its previous close of $2006.02, possibly indicating a short-term pullback.

On the support and resistance front, the asset is trading above the main support level of $1930.64 and minor support of $1952.21.

The positioning above key moving averages and support levels leans toward bullish market sentiment for gold.