Gold Prices Forecast: XAU/USD Hits 7-Month Peak Amid Fed Uncertainty

Highlights

• Gold sees strongest weekly gains in over seven months, buoyed by Middle East tensions.
• Market sentiment hints at the end of the Fed’s interest rate hike cycle.
• Despite modest U.S. inflation uptick, Treasury yields and dollar retract.
• Ongoing Israel-Hamas conflicts bolster gold’s status as a safe-haven asset.

Gold’s Best Week in Seven Months

Gold (XAU/USD) is enjoying its most robust weekly performance in over half a year, lifted by geopolitical tensions in the Middle East and market speculation that the U.S. Federal Reserve’s interest rate hike cycle may be coming to an end. Spot gold was up by 0.3% at $1,873.25 per ounce, while U.S. gold futures added 0.2% to $1,885.80.

Federal Reserve Speculation and Market Response

Recent U.S. inflation data failed to significantly alter the market’s view on the Fed’s next moves. Despite a modest uptick in consumer prices, Treasury yields and the dollar have pulled back. Market sentiment appears to be gravitating towards the belief that the era of rate hikes could be drawing to a close.

Geopolitical Tensions and Safe-Haven Status

Adding to gold’s allure is its traditional role as a safe-haven asset. Ongoing military conflicts between Israel and Palestinian group Hamas have contributed to the metal’s rise. These geopolitical tensions have solidified gold’s role as a stable investment, particularly when uncertainty looms large on the global stage.

China’s Economic Data and Deflationary Pressures

Another contributing factor to gold’s rise comes from China, the world’s largest consumer of the precious metal. Recent data showed weaker-than-expected inflation and factory-gate prices, signaling that deflationary pressures are persistent, which typically supports gold prices.

Short-Term Outlook: Bullish

Given the amalgamation of Fed speculation, geopolitical tensions, and global economic indicators, gold is likely to maintain its upward trajectory in the near term. Traders should watch for gold prices to trade in the range of $1,856 to $1,904, supported by a possible slowdown in the U.S. economy and persistent global uncertainties.

Technical Analysis

The current daily price of Gold (XAU/USD) at $1876.94, while below the 200-day and 50-day moving averages, does reside above the minor resistance at $1856.86 and well above the minor support at $1811.03.

This indicates a degree of bullishness and strength in the market as it has successfully surpassed these levels. It seems the market is challenging the main resistance at $1885.46.

The scenario suggests a mixed sentiment: bearish due to moving averages but somewhat bullish as the price is above minor resistance and support.