Gold Prices Forecast: XAU/USD Hovers Near One-Week Low Ahead of GDP Report

Key Points

• Gold struggles with a strengthening U.S. dollar.
• U.S. economy’s robust start to 2024 impacts gold prices.
• Short-term gold outlook influenced by key economic data, Fed policy. 

Gold Market Outlook

Gold prices are currently hovering near a one-week low, influenced by a stronger U.S. dollar and higher bond yields. This trend follows recent strong U.S. business activity data and precedes key economic events, including the release of U.S. GDP numbers and the European Central Bank’s (ECB) policy meeting.

At 07:33 GMT, Gold (XAU/USD) is trading $2017.68, up $3.45 or +0.17%.

U.S. Economic Strength and Gold Prices

The U.S. economy has started 2024 robustly, with business activity in January indicating expansion. The S&P Global flash U.S. Composite PMI Output Index, a key indicator of economic health, rose significantly, driven by improvements in both the services and manufacturing sectors. This positive economic outlook has led to a pricing out of policy easing and a diminished risk of a recession, subsequently exerting downward pressure on gold prices.

Supply Chain and Inflation Factors

Despite the positive economic indicators, challenges in supply chains and potential inflation risks remain. Delays in material supplies due to transportation issues and international tensions could lead to rising costs for raw materials. These factors need close monitoring as they could influence future inflation and economic growth rates.

Interest Rate and Dollar Impact

The Federal Reserve’s interest rate decisions and the strength of the U.S. dollar are crucial factors impacting gold prices. With the possibility of interest rate cuts in the first half of 2024, the opportunity cost of holding non-yielding bullion may decrease, potentially supporting gold prices. However, the strength of the dollar remains a countervailing force, making gold more expensive for holders of other currencies.

Short-term Forecast

In the short term, gold market trends will likely be influenced by upcoming economic data releases, including U.S. GDP figures and the ECB policy decision. Expectations of a slowdown in economic growth, coupled with interest rate and inflation dynamics, suggest a cautious outlook for gold prices.

While the metal may see some support from potential rate cuts, the overall stronger U.S. economic performance and a robust dollar could continue to weigh on gold, pointing to a bearish short-term forecast.

Technical Analysis

Gold (XAU/USD) has weakened, struggling with the 50-day moving average over the past seven sessions. Today, it stands at $2025.75, establishing it as resistance.

A sustained move below the 50-day MA would signal the presence of sellers. Breaking below the nearest support at $2009.00 would indicate strengthening selling pressure. This could create enough downside momentum to extend the selling towards the 200-day moving average at $1963.92.

Conversely, overcoming the 50-day MA could trigger an upward acceleration, with the next resistance target at $2067.00.