Gold (XAU) Daily Forecast: Can XAU/USD Break $2,529 Resistance as Fed Signals Rate Cuts?

Market Overview

Gold (XAU/USD) managed to halt its previous day’s decline, rising to $2,518 after finding support at the $2,515 level. This recent uptick can be attributed to rising expectations of Federal Reserve interest rate cuts and ongoing global uncertainties, particularly geopolitical tensions, bolstering demand for the precious metal.

Meanwhile, silver also edged higher, benefiting from similar market conditions.

Key Drivers Behind the Gold and Silver Rally

Fed Rate Cut Expectations: Investors increasingly anticipate that the Federal Reserve will cut interest rates in the coming months. Rate futures markets have already priced in a 25 basis point reduction for September, with a 36.5% probability of a deeper cut.

Fed Chair Jerome Powell’s recent comments at Jackson Hole hinted that the rising rate era might be ending. Lower rates would reduce the opportunity cost of holding non-yielding assets like gold, thereby boosting demand.

US Economic Data on the Horizon: Market participants closely monitor upcoming US economic data, particularly the second estimate of Q2 Gross Domestic Product (GDP), expected to show a 2.8% increase.

Additionally, July’s Personal Consumption Expenditures (PCE) Price Index is forecasted to rise by 2.6% year-over-year.

These figures will be pivotal in shaping the Fed’s policy decisions and could significantly influence gold and silver prices.

Geopolitical Uncertainty

Although gold’s price movement has been influenced by geopolitical tensions, particularly in the Middle East, the focus remains on the broader implications for global markets. Increased political instability globally tends to drive investors toward safe-haven assets like gold and silver.

Impact of the US Dollar: The relatively mild demand for the US Dollar has a nuanced impact on gold prices. Since gold is priced in USD, a weaker dollar makes gold less expensive for holders of other currencies, thereby increasing its demand.

Looking Ahead: What Investors Should Watch

Q2 GDP Estimate: The second estimate for Q2 GDP, due on Thursday, could provide critical insights into the US economy’s health, influencing expectations around the Fed’s monetary policy.

PCE Price Index: July’s PCE Price Index, a key inflation gauge, will be closely watched on Friday. Any surprises here could lead to significant shifts in gold and silver prices as investors recalibrate their expectations for Fed action.

Short-Term Forecast

Gold (XAU/USD) is expected to maintain its bullish momentum above $2,515, with potential to test resistance at $2,529. A break below could target $2,500 support.

Gold Prices Forecast: Technical Analysis

Gold (XAU/USD) is currently valued at $2,518.68, marking a 0.51% increase, and demonstrating resilience just above the crucial pivot point of $2,516.55. The 4-hour chart indicates a bullish engulfing pattern, suggesting the possibility of an ongoing upward trajectory.

Immediate resistance is found at $2,529.03, with additional obstacles situated at $2,541.48 and $2,555.85. The 50-day EMA, resting at $2,510.15, underpins the ongoing buying momentum, while the more substantial 200-day EMA at $2,481.08 solidifies a long-term bullish outlook.

Should prices maintain their position above $2,515, the upward trend is likely to continue. Conversely, a breach below this level could lead to a rapid decline, targeting the $2,500.15 support area, with further support levels at $2,486.23 and $2,470.51.