Gold (XAU) Daily Forecast: Uptrend Holds Firm as U.S. Dollar Weakens on Rate Cut Hopes

Market Overview

Gold continued its upward momentum for the second consecutive day on Friday, trading around the $2,645 mark. The rally is primarily driven by growing expectations that the Federal Reserve may continue cutting interest rates amid signs of labor market weakness.

The U.S. dollar has softened, trading below its mid-August highs. However, stronger-than-expected U.S. inflation data have tempered hopes for a more aggressive rate cut, providing some support for the dollar and limiting gold’s upside potential.

US Dollar Weakens as Rate Cut Bets Increase

The U.S. dollar remains under pressure as the market anticipates additional rate cuts, despite the labor market showing signs of slowing. A weaker dollar typically benefits gold, as it lowers the cost of the metal for buyers using other currencies.

On the flip side, recent data from the U.S. Labor Department showed that the Consumer Price Index (CPI) rose 2.4% year-over-year in September, while the core CPI increased by 3.3%.

This data briefly lifted the dollar to a two-month high, but gains quickly faded as traders shifted their focus back to potential rate cuts.

Market Awaits US PPI Report Amid Volatile Sentiment

Investors are now keenly watching the upcoming U.S. Producer Price Index (PPI) report, which could set the tone for short-term dollar movements and impact gold prices.

A higher-than-expected PPI reading could boost the dollar, potentially capping further gains for gold.

Conversely, a softer PPI might weaken the dollar, increasing gold prices.

“Given the high yield on the 10-year U.S. government bond—currently above 4%—the dollar could maintain some strength, which may limit gold’s rally,” noted Hiroshi Ishikawa, an analyst at Daiwa Securities.

The market also speculates that China may introduce new fiscal stimulus measures over the weekend to support its economy, which could further influence gold’s trajectory.

While this could add a layer of complexity, it underscores the ongoing global economic uncertainties that are likely to keep gold in focus as a safe-haven asset.

Short-Term Forecast

Gold remains bullish above the $2,635 pivot, targeting $2,659 if resistance at $2,649.77 is breached. A dip below $2,635 could trigger selling pressure.

Gold Prices Forecast: Technical Analysis

Gold (XAU/USD) is trading at $2,644.12, up 0.54% today. The price has managed to stay above the key pivot point at $2,635.26, supported by a bullish “Three White Soldiers” candlestick pattern, which often signals further upward movement. Immediate resistance is $2,649.77, followed by $2,659.34 and $2,672.36.

On the downside, immediate support is at $2,622.76, with deeper levels at $2,606.09 and $2,594.36. The 50-day EMA at $2,629.53 and the 200-day EMA at $2,623.08 are also strong support levels.

A sustained move above $2,649.77 could push gold toward the $2,659 range. However, if prices dip below $2,635, expect potential bearish momentum to build. Overall, gold’s outlook remains bullish above $2,635, with key resistance levels in focus for potential upside momentum.