Gold (XAU) Daily Forecast: Struggles Below $2,500 as Dollar Strength Caps Gains

Market Overview

Gold prices (XAU/USD) managed to halt their recent decline, inching higher during Wednesday’s Asian session, though they remain below the $2,500 mark.

This slight rebound is largely attributed to escalating geopolitical tensions in the Middle East and growing expectations of a potential Federal Reserve rate cut. However, the strength of the U.S. dollar is capping further gains for the precious metal.

U.S. Dollar Strength and Fed Rate Cut Speculation Limit Gold’s Upside

The U.S. dollar has regained momentum, which has tempered gold’s recent rally. Investors are now focusing on key upcoming U.S. economic reports, including the JOLTS Job Openings and the Federal Reserve’s Beige Book, both scheduled for release later on Wednesday.

Additionally, Friday’s August Nonfarm Payrolls (NFP) data is highly anticipated and is likely to shape market sentiment regarding the Fed’s interest rate strategy.

A weaker-than-expected NFP report could increase fears of an economic slowdown, raising speculation of faster Fed rate cuts. Lower interest rates typically benefit gold, as they reduce the opportunity cost of holding non-yielding assets.

Recent U.S. data also suggests that market expectations for a rate cut are increasing. The ISM Manufacturing PMI inched up to 47.2 in August from 46.8 in July, still below the forecast of 47.5.

Following this report, the probability of a more aggressive half-point rate cut rose to 39%, up from 31%, according to CME Group’s FedWatch tool. JOLTS Job Openings are expected to slightly decrease to 8.10 million in July, while the ISM Services PMI is forecasted to tick up to 51.4 from 51.1 in July.

China’s Economic Slowdown and Geopolitical Tensions Boost Gold’s Appeal

Gold’s appeal has also been influenced by economic concerns in China. The Caixin Services PMI for August declined to 51.6 from 52.1, missing market expectations and adding to fears of a prolonged slowdown in China’s economy.

At the same time, rising geopolitical tensions in the Middle East, particularly in Israel and Gaza, are bolstering gold’s safe-haven status, offering support to prices amid broader market uncertainty.

In the near term, gold prices will likely remain influenced by U.S. economic data and geopolitical developments.

Short-Term Forecast

Gold remains under pressure below $2,500, with key resistance at $2,501.21. A break above this level could signal a bullish reversal, while failure to do so keeps a bearish outlook.

Gold Prices Forecast: Technical Analysis

Gold (XAU/USD) trades at $2,495.92, up 0.12% in the 4-hour chart, but faces resistance around key levels. The $2,495 pivot point aligns with the 50-day Exponential Moving Average (EMA) at $2,501.21, which caps any upward moves.

Immediate resistance lies at $2,506.59, followed by $2,515.34, while support is found at $2,485.88, with further levels at $2,477.54 and $2,469.12.

The 4-hour timeframe shows a downward trendline, limiting gold’s upside potential. If gold fails to break above $2,495, it may continue to face bearish pressure. However, a break above the $2,501.21 EMA could spark a bullish reversal.