Gold (XAU) Daily Forecast: Upward Channel Supports Rally – Next Target $2,650?

Market Overview

Gold prices (XAU/USD) extended their rally on Tuesday, climbing to an all-time high of nearly $2,636 during the Asian trading session. This marks the fourth consecutive day of gains for the precious metal, driven by concerns over U.S. economic uncertainty and expectations of aggressive monetary policy easing by the Federal Reserve.

The U.S. dollar, meanwhile, continues to struggle as investors price in further rate cuts, weakening the currency’s appeal and bolstering demand for gold. The anticipation of additional rate reductions follows last week’s 50 basis point cut by the Federal Reserve, with market expectations leaning toward another 125 basis points of cuts in 2024.

Fed Rate Cut Expectations and Inflation Drive Gold Higher

The Federal Reserve’s recent actions have set the stage for a more dovish monetary policy moving into next year. According to the CME Group’s FedWatch Tool, markets have already priced in another substantial rate cut, expected at the upcoming November meeting.

Federal Reserve officials, including Neel Kashkari and Raphael Bostic, have voiced concerns about slowing labor market conditions and inflation, reinforcing the likelihood of further easing.

“Investors are increasingly viewing gold as a hedge against inflation and a weakening dollar,” said a market strategist at Goldman Sachs. Rising inflationary pressures, highlighted by higher prices for goods and services in the latest US PMI report, continue to make non-yielding assets like gold an attractive option.

Upcoming Data and Geopolitical Concerns Add Fuel

Investors remain cautious ahead of the US Personal Consumption Expenditures (PCE) Price Index release on Friday, a key inflation indicator closely monitored by the Federal Reserve. Higher-than-expected inflation data could solidify the case for continued rate cuts, further boosting gold.

In addition to domestic economic factors, geopolitical tensions in the Middle East have contributed to gold’s upward momentum. Heightened regional conflict and global economic uncertainties have driven investors to seek safety in gold, pushing prices toward record highs.

Short-Term Forecast

Gold (XAU/USD) is likely to remain bullish above $2,632. Key resistance levels are $2,645 and $2,653.75. A break below $2,632 may trigger sharp selling toward $2,618 support.

Gold Prices Forecast: Technical Analysis

Gold (XAU/USD) trades at $2,636.93, up 0.27%, supported by a well-defined upward channel on the 2-hour chart. The immediate support sits at $2,632, which aligns closely with the pivot point of $2,632.38. This level is crucial in maintaining the current bullish momentum.

Should prices hold above this mark, the next resistance levels to watch are $2,645 and $2,653.75. A break above these points could signal further upside, with the $2,662.75 level acting as the next target.

The 50-day EMA at $2,618 is acting as solid support, while the 200-day EMA rests lower at $2,582. If gold falls below $2,632, we may see sharp selling pressure.