Gold (XAU) Daily Forecast: Fed Rate Cut Speculation Fuels Rally Near $2,500

Market Overview

Gold prices (XAU/USD) maintained upward momentum, trading firmly around the $2,500 level on Wednesday and reaching an intra-day high of $2,506. This bullish run is driven by increasing market expectations for a more aggressive interest rate cut by the Federal Reserve (Fed) in September, following a sharp decline in U.S. job openings to a three-and-a-half-year low.

Economic uncertainties and cautious sentiment among investors are also boosting the demand for gold as a safe-haven asset.

Despite the favourable backdrop, traders remain cautious ahead of Friday’s U.S. Nonfarm Payrolls (NFP) report, a key economic indicator that could significantly influence market sentiment.

Attention is now focused on upcoming U.S. economic data, including Thursday’s ADP employment report, Weekly Jobless Claims, and ISM Services PMI, all expected to provide short-term trading opportunities and deeper insights into the Fed’s likely course of action.

US Dollar Weakens as Fed Rate Cut Speculation Grows

The U.S. dollar has faced downward pressure amid growing speculation that the Federal Reserve may implement a more substantial rate cut in September. The latest U.S. labor market report revealed that job openings fell to 7.673 million in July, the lowest level since January 2021. June’s figures were also revised lower, further signaling a weakening job market.

Additionally, the Fed’s Beige Book report showed a decline in economic activity in nine out of twelve U.S. regions in August, compared to just five regions in mid-July. This economic slowdown, coupled with comments from Fed officials suggesting that the current restrictive policy may not be needed much longer, has fueled speculation of a significant rate cut.

The CME Group’s FedWatch Tool indicates a 45% probability of a 50-basis-point rate reduction at the Fed’s September 17-18 meeting.

Bond Yields Decline, Supporting Gold Prices

The dovish outlook on U.S. monetary policy has driven the yield on two-year U.S. Treasury bonds to its lowest level since May 2023, with the 10-year yield also dropping to its lowest point since July.

Lower bond yields and a weaker U.S. dollar have provided additional support for gold, which remains an attractive investment during times of economic uncertainty. As global equity markets soften, gold continues to benefit as a non-yielding, safe-haven asset.

In the coming days, economic reports and market data will further clarify the trajectory of U.S. monetary policy, with investors closely watching for signals that could push gold prices even higher.

Short-Term Forecast

Gold (XAU/USD) remains bullish, hovering near $2,500. A break above $2,506.59 could lead to further gains, while a drop below $2,498 may trigger a short-term correction.

Gold Prices Forecast: Technical Analysis

Gold (XAU/USD) is trading at $2,497.38, up by 0.08%, showing bullish momentum. The precious metal is testing key resistance near the $2,500 mark, with the 50-day Exponential Moving Average (EMA) at $2,497.78 acting as a pivotal support level.

If prices can break through immediate resistance at $2,506.59, we could see a continuation toward the next targets at $2,515.34 and $2,525.45. However, if gold falls below its pivot point at $2,498.18, it may encounter immediate support at $2,486.66, with further downside risks toward $2,479.35.

Gold maintains a bullish outlook, but staying above $2,498 is crucial to sustaining this upward trend.