Gold Prices Forecast: XAU/USD Posts Strong Month Fueled by Middle East Crisis

Highlights

• Gold marks strongest month since November 2022.
• U.S. Treasury yields impact investor sentiment.
• Cautiously bullish short-term forecast for gold.

Gold Navigates Market Tensions Amid Central Bank Decisions

As gold (XAU/USD) traders brace for a tumultuous week filled with central bank meetings, the safe-haven asset marks the end of its strongest month since November 2022. The ongoing conflict between Israel and Hamas has pushed spot gold prices to $2,009.29 an ounce, its peak since mid-May. The surge represents an 8% monthly increase, instigated by geopolitical instability.

Middle East Crisis and Market Reaction

Despite Israel’s slightly moderated stance in Gaza, gold prices have only marginally fallen below the $2,000 mark. This reflects the market’s continued apprehension about escalating tensions in the Middle East. Meanwhile, the focus remains on the upcoming U.S. Federal Reserve meeting scheduled for Wednesday, which could impact gold prices depending on monetary policy decisions.

US Treasury Yields and Fed Policy

U.S. Treasury yields have been on a roller coaster, hitting a high of 4.888% for the 10-year Treasury. Investor sentiment is aligned with the expectation that the Fed will likely keep interest rates unchanged. The past month has seen the 10-year Treasury yield soar above 5%, prompting several Fed officials to suggest that current elevated yields are already exerting economic moderation.

Economic Indicators and Dollar Strength

Further influencing the gold market are key economic reports due this week, including the ADP employment change figures and the September jobs report. The U.S. dollar has somewhat lost its momentum but remains buoyed by the U.S. economic resilience and the possibility of another rate hike by the Fed.

Short-Term Forecast: Cautiously Bullish

The market appears cautiously bullish on gold for the short term. Geopolitical tensions continue to drive demand for the metal, and while central bank meetings may induce volatility, the existing economic climate—marked by rising Treasury yields and a resilient U.S. dollar—lends some degree of stability to gold prices.

Technical Analysis

The current daily price of gold (XAU/USD) at 1993.340 is slightly below its previous close but remains above both the 200-day moving average of 1933.247 and the 50-day moving average of 1916.878. This suggests inherent strength in the gold market.

The asset is nearing the minor resistance level at 2009.00, while comfortably staying above the main support level of 1952.210.

Given its performance relative to key moving averages and support and resistance levels, the market sentiment for gold appears to be cautiously bullish.