Gold Prices Forecast: XAU/USD Holds Firm Despite Fed Rate Hike Signals

Highlights

• Gold prices firm, resisting Powell’s hawkish tone on interest rates.
• Subdued Treasury yields and steady U.S. Dollar boost gold’s appeal.
• Powell’s Jackson Hole remarks hint at more rate hikes, citing inflation worries.

Gold Prices Amid Interest Rate Speculations

Gold’s Resilience Gold prices showed unexpected strength on Monday, buoyed by a combination of subdued Treasury yields and an unchanged U.S. Dollar, even in the face of Jerome Powell’s hawkish comments on interest rates.

Powell’s Impact on the Markets

At the annual Jackson Hole meeting in Wyoming, Powell, the U.S. Federal Reserve Chair, hinted at the possibility of further rate hikes due to heightened inflation concerns, emphasizing the robustness of the U.S. economy. Despite this, it appears that traders had already factored in this hawkish sentiment, resulting in minimal market turbulence post-speech.

Anticipating Further Moves

Gold’s future trajectory remains uncertain, as accelerating inflation and the resilience of the U.S. economy could herald a rate hike as early as November. Echoing this sentiment, Loretta Mester from the Cleveland Federal Reserve Bank stated that quelling inflation might necessitate another interest rate increment, followed by a period of stability.

Upcoming Economic Indicators

Market participants are now keenly awaiting a slew of economic data, with the U.S. non-farm payroll report due on Friday expected to shed further light on the state of the economy. Additionally, recent data underscores the waning bullish sentiment in gold; COMEX gold speculators reduced their net long positions significantly in the week ending August 22.

Short-Term Forecast

Given the looming economic data and potential rate hikes, the short-term outlook for gold leans bearish. As interest rates rise, the appeal of non-yielding assets like gold typically diminishes. Nevertheless, there is the potential for a strong short-covering rally since most of what Powell said on Friday had already been priced into the market.

Technical Analysis

Gold is currently displaying a slight uptick in momentum, with the current 4-hour price of XAU/USD at 1917.34, a marginal increase from the previous close at 1915.71. This suggests a mildly bullish undertone in the very short-term price action.

Moving Average Insights

The current 4-hour price rests comfortably above the 50-4H moving average, which stands at 1902.73, indicating an underlying strength in the market. However, the commodity still lags behind the longer-term 200-4H moving average positioned at 1935.94. This positioning showcases a tug of war between medium-term bearishness (since the price is below the 200-4H MA) and short-term bullishness (above the 50-4H MA).

Momentum and Key Levels

The 14-4H RSI reading stands at 58.85, suggesting that the commodity possesses a moderately strong momentum, being slightly above the neutral threshold of 50 but not entering the overbought territory. Furthermore, the XAU/USD price is nestled between the main support area of 1893.07 to 1885.79 and the main resistance zone of 1946.99 to 1964.88. This indicates that the commodity is currently consolidating, seeking direction.

Overall Sentiment

Considering the above factors, the gold market portrays a cautiously bullish stance in the short-term. The price above the 50-4H MA, combined with a moderately strong RSI, lends confidence. However, the significant resistance posed by the 200-4H MA implies the need for robust momentum to establish a decisive bullish or bearish direction.