Gold Prices Forecast: XAU/USD Jumps as Fed Chair Hints at Rate Cuts

Gold Edges Higher as Fed Signals Potential Rate Cuts

Gold prices are moving upward on Wednesday, finding strong support at the 50-day moving average of $2343.27. The market’s next challenge is to surpass last week’s high of $2392.97 to attract new buyers and fresh capital.

At 11:11 GMT, XAU/USD is trading $2372.93, up $8.90 or +0.38%.

Fed Chair’s Cautious Stance

Federal Reserve Chair Jerome Powell’s recent comments have bolstered the case for interest rate cuts. While maintaining a cautious approach, Powell acknowledged improved inflation data and stated that “more good data would strengthen” the argument for looser monetary policy. This stance has provided support for gold prices.

Market Expectations

Traders are currently pricing in a 73% probability of a rate cut in September, with another reduction expected by December, according to CME Group’s FedWatch Tool. The non-yielding nature of gold makes it more attractive in a lower interest rate environment.

Treasury Yields and Economic Outlook

U.S. Treasury bond yields decreased slightly on Wednesday following Powell’s warning about the potential negative impact of prolonged high interest rates on economic growth. The 10-year Treasury yield fell by 2 basis points to 4.275%, while the 2-year Treasury note yield remained relatively stable at 4.618%.

Upcoming Economic Data

Investors are eagerly anticipating key economic releases, including the June Consumer Price Index (CPI) on Thursday and the Producer Price Index on Friday. The CPI data is expected to show headline prices rising 0.1% month-on-month and core prices gaining 0.2%, with annual increases of 3.1% and 3.4%, respectively.

ETF Inflows

The World Gold Council reported that global physically backed gold exchange-traded funds experienced inflows for the second consecutive month in June, driven by additions to holdings in Europe- and Asia-listed funds.

Market Forecast

The short-term outlook for gold appears bullish. With the Fed signaling a potential shift towards rate cuts and ongoing economic uncertainties, gold’s appeal as a safe-haven asset is likely to strengthen. However, the market will be closely watching the upcoming CPI data, which could influence the Fed’s decision-making process and, consequently, gold prices in the near term.

Technical Analysis

Support and Resistance Levels

Gold maintains its position above the 50-day moving average at $2343.29, which serves as key support. This level has held for six consecutive trading sessions, indicating buyer presence.

Breakout Potential

The market faces resistance at last week’s high of $2392.97. A break above this level could trigger a rally towards $2450.13. Such a move is likely to be driven by significant news events.

Downside Scenario

If gold falls below the 50-day moving average, it may not necessarily indicate a bearish trend. Instead, it could suggest the market needs more time to consolidate before attempting an upward move.

Strong Support Zone

A triple-bottom formation between $2277.34 and $2293.69 provides a robust support zone, offering potential buying opportunities on significant dips.