Gold Prices Forecast: US CPI, Fed Minutes to Dictate XAU/USD Future Value

Highlights

• Spot gold hovers near late September highs, driven by dovish Fed commentary.
• Top Fed officials cast doubt on necessity and pace of future rate hikes.
• Upcoming CPI data and Fed meeting minutes set to steer gold market direction.
• Middle East turmoil provides a tailwind for gold as a safe-haven asset.

Gold Prices Pause Amid Rate Hike Debate

Gold (XAU/USD) prices showed resilience as the dollar weakened following comments by Federal Reserve officials that a surge in Treasury yields may reduce the need for further rate hikes. Spot gold hovered at $1,860.29 per ounce, close to its highest level since late September, while U.S. gold futures remained steady at $1,873.90.

Fed’s Rate Hike Questioned

Several top Fed officials have started questioning the speed and necessity of future interest rate hikes. Minneapolis Fed President Neel Kashkari suggested that the rise in long-term Treasury yields could make additional hikes less urgent. Meanwhile, Atlanta Fed President Raphael Bostic sees no more rate hikes on the horizon. This dovish outlook has pushed the dollar to a near two-week low against other major currencies.

Inflation and Opportunity Costs

The debate over interest rates comes at a time when U.S. inflation has receded from its peak, according to San Francisco Fed President Mary Daly. Higher interest rates generally make gold, which yields no interest, less attractive to investors. But as rate hike expectations diminish, the opportunity cost of holding gold decreases.

Market Watch: Upcoming Data and Mid-East Tensions

Investors are eyeing two major releases this week for cues: the Fed’s September meeting minutes and the U.S. Consumer Prices Index (CPI). A higher-than-expected CPI could again raise prospects of tighter monetary policy, potentially pressuring gold prices. Meanwhile, ongoing conflicts in the Middle East continue to act as a tailwind for the safe-haven asset.

Short-term Outlook: Mixed

In the short term, gold’s trajectory appears mixed. Despite safe-haven buying amid geopolitical tensions, the metal’s next major move will likely be dictated by upcoming U.S. economic data and Fed policy. If the Fed signals a more hawkish stance, it could cap gold’s gains, making the short-term outlook uncertain at best.

Technical Analysis

Gold (XAU/USD) is currently trading at $1860.31, positioned below both the 200-Day and 50-Day moving averages, at $1928.49 and $1902.61 respectively, indicating a bearish undertone.

Despite this, the asset is trading above its main and minor support levels of $1752.85 and $1811.03. Resistance levels loom at $1856.86 and $1885.46.

Overall, the market sentiment leans bearish due to the price’s position relative to the key moving averages. However, momentum may begin to shift to the upside if buyers can overcome the minor resistance at $1856.86.