Gold Prices Forecast: XAU/USD Surges as Middle East Tensions, Fed Uncertainty Loom

Uncertainty Around Fed Policy

Investors are also keeping a close eye on the Federal Reserve. Chairman Jerome Powell’s recent speech to the Economic Club of New York provided neither a clear bullish nor bearish signal on interest rates. While Powell didn’t entirely rule out further rate hikes, the market interpreted his remarks as diminishing the likelihood of immediate action. This sentiment led to a reduction in futures market bets on a November or even December rate hike.

Powell’s Inflation Watch

Despite acknowledging some progress in curbing inflation, Powell remained steadfast in pursuing the central bank’s 2% inflation target. In his remarks, Powell underlined that although the pace of inflation has decelerated, it is still too early to claim victory. A series of interest rate hikes since March 2022 has managed to bring the benchmark rate to its highest in 22 years. The market, however, anticipates the Fed might go easy on additional rate hikes.

Gold and the Rising Benchmark Rate

Higher interest rates usually increase the opportunity cost of holding non-yielding assets like gold. Dallas Fed President Lorie Logan hinted that the central bank is in no rush to change its current policy, corroborated by the CME FedWatch tool showing market expectations for the Fed to maintain current rates.

Short-Term Outlook

Given the murky waters surrounding the Fed’s future policies and mounting geopolitical tensions, the short-term outlook for gold is bullish. Investors are likely to continue flocking to this safe haven until there’s more clarity on both fronts.

Technical Analysis

The current daily price of Gold (XAU/USD) at 1978.36 is trading above both the 200-day moving average of 1930.90 and the 50-day moving average of 1904.17, indicating bullish momentum.

The asset has also surpassed both minor and main resistance levels at 1952.21 and 1930.64, respectively, reinforcing the bullish sentiment.

Surpassing key resistance levels and trading above major moving averages usually signals a strong uptrend. Given this data, the market sentiment for gold appears to be decidedly bullish.