Gold (XAU) Daily Forecast: Can China’s Stimulus Counter U.S. Dollar Strength and Boost Gold?

“The U.S. economy added 254,000 jobs in September, significantly surpassing market forecasts of 170,000,” according to a recent report from the Bureau of Labor Statistics.

Additionally, the unemployment rate unexpectedly dipped to 4.1%, reinforcing the resilience of the labor market.

These numbers have led to a reassessment of the Fed’s rate policy. The CME Group’s FedWatch Tool now shows a 95% probability that the Fed will keep rates unchanged at its next meeting, a sharp decrease from the previously expected rate cuts.

Consequently, the U.S. dollar surged to a seven-week high, making gold less attractive to investors.

Market Optimism Capping Gold’s Potential Upside

Besides the robust U.S. data, market optimism surrounding China’s continued stimulus efforts is also weighing on gold. The People’s Bank of China has maintained its accommodative monetary stance, aiming to support economic growth.

This has reduced fears of a recession in the world’s second-largest economy and has driven a more positive market outlook.

“Investors are favoring riskier assets as concerns over a global slowdown ease, putting further pressure on non-yielding assets like gold,” noted a senior analyst at UBS.

Outlook: US CPI Data in Focus

Looking ahead, investors will be watching the U.S. Consumer Price Index (CPI) data set to be released tomorrow. Any signs of persistent inflation could lead to expectations of a prolonged higher interest rate environment, putting additional downward pressure on gold.

Short-Term Forecast

Gold remains under pressure, struggling below the $2,648.78 pivot point. A break below $2,640.76 could signal more downside, targeting $2,631.80 and $2,624.96 support levels.