Gold Prices Forecast: XAU/USD Rises Amid US Economic Slowdown

Highlights

• Gold (XAU/USD) nears one-month highs, swayed by U.S. economic trends, raising questions about rate hikes.
• SPDR Gold Trust’s recent uptick hints at rising investor interest amidst global uncertainties.
• Gold braces for nearly 1% monthly decline amid U.S. dollar surge and Treasury yield ascent.

Gold Prices and U.S. Data

Gold (XAU/USD) prices hovered near one-month highs on Thursday, influenced by recent soft U.S. economic figures. These numbers have led many to believe that the Federal Reserve might halt its rate hikes soon. However, forthcoming inflation readings could shift this perspective.

Market Indicators

U.S. Treasury yields dropped as reports indicated slowing economic growth. Recent ADP data revealed job additions of 177,000 in August, missing the Dow Jones prediction of 200,000, and considerably below July’s revised figure of 371,000.

Moreover, there was a downward adjustment of the Q2 GDP growth to 2.1%, suggesting a deceleration in economic activity, albeit still at a robust pace. Wall Street is now focused on the upcoming non-farm payroll data for insights into the economy’s trajectory and job market direction.

Consumer Confidence and Inflation

Recent data, such as the consumer confidence index, which registered at 106.1, missed the Dow Jones estimate of 116. This suggests reduced consumer optimism. The report also highlighted rising inflation expectations over the next year. Furthermore, JOLTs job data indicated a decrease in available jobs to 8.8 million in July, the smallest since March 2021.

Federal Reserve’s Decision

The new figures will play a pivotal role in the Federal Reserve’s upcoming interest rate policy decision. The market is currently uncertain whether the Fed will continue its rate hikes, especially after its July increase, concluding a series of hikes that began early in 2022.

Bullion and Economic Outlook

Despite the week’s uptick, gold is set for almost a 1% monthly drop. Simultaneously, the U.S. dollar is gearing up for its first monthly surge in three months, and Treasury yields anticipate their fourth consecutive monthly rise, hitting 2007 peaks last week. Investors are eagerly awaiting comprehensive insights into inflationary trends.

Meanwhile, the Personal Consumption Expenditures (PCE) and monthly job statistics will offer clues about potential shifts in U.S. interest rates. Reports this week have shown the U.S. economy’s slower-than-anticipated Q2 growth, with job openings hitting a low not seen in over two years.

Forecast

The slowing economic and job market indicators, coupled with the possibility of the Federal Reserve ending its interest rate hikes, generally bode well for gold. Historically, lower interest rates or the anticipation of them tend to increase the appeal of non-yielding assets like gold.

The uptick in holdings by SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, suggests increased investor interest in the metal. Additionally, China’s contracting manufacturing could potentially lead to economic headwinds globally, further bolstering gold’s appeal as a safe-haven asset.

Given these factors, the outlook for gold prices is bullish in the short to medium term.

Technical Analysis

The current 4-hour price of 1944.88 is slightly below the previous at 1945.83. The price is above both the 200-4H moving average of 1933.96 and the 50-4H moving average of 1916.66, indicating bullish momentum. The 14-4H RSI stands at 70.26, signaling an overbought condition which could suggest a potential pullback or consolidation.

The commodity is hovering near the main resistance area of 1946.99 to 1954.88. Considering these factors, the current market sentiment leans bullish, but caution is warranted due to the overbought RSI reading.