Gold (XAU) Daily Forecast: Will China’s Stimulus and Weak USD Support Gold Prices?

Market Overview

Gold prices (XAU/USD) continue to face downward pressure, hovering around $2,656.10 after touching an intraday low of $2,647. Despite favourable conditions such as a weaker U.S. dollar and dovish expectations from the Federal Reserve, the precious metal struggles to attract bullish interest due to an ongoing risk-on sentiment in global markets.

China’s Economic Measures Dampen Gold’s Appeal

The recent uptick in market sentiment followed China’s announcement to cut mortgage rates for existing home loans by the end of October, alongside a substantial stimulus package—its largest since the pandemic. The People’s Bank of China’s move has boosted investor confidence, leading to reduced demand for safe-haven assets like gold.

Despite this, Chinese economic data remains mixed. The official Manufacturing PMI for September rose to 49.8, up from 49.1 in August, but still signals contraction. Meanwhile, the Caixin Manufacturing PMI dropped to 49.3, and the Non-Manufacturing PMI fell slightly to 50.0.

This uneven recovery limits the impact of China’s measures on broader market sentiment, keeping gold’s trajectory uncertain.

Geopolitical Risks Support Safe-Haven Demand

Rising geopolitical tensions in the Middle East continue to act as a counterbalance to positive economic sentiment. Escalations between Israel and Iran-backed groups, such as Hezbollah, are fueling demand for protective assets.

Over the weekend, Israeli airstrikes targeted various locations in Yemen and Lebanon, leading to renewed concerns about potential supply chain disruptions and their effect on global markets.

“Gold remains caught between risk-on sentiment driven by China’s stimulus and the safe-haven demand due to escalating geopolitical tensions,” noted Priyanka Sachdeva, Senior Market Analyst at Phillip Nova.

Dovish Fed and Weak U.S. Dollar Offer Support

In the U.S., expectations of a dovish Federal Reserve have kept the dollar near its lowest level since July 2023. Market forecasts suggest that the Fed may cut interest rates by another 50 basis points in November.

A weaker dollar generally supports gold prices, making the metal more affordable for foreign buyers.

Overall, conflicting signals from global markets and geopolitical risks create a mixed outlook for gold, with prices struggling to find a clear direction amid competing factors.

Short-Term Forecast

Gold will likely remain under pressure, with key support at $2,647. A break below could trigger further downside, while resistance at $2,665 must be cleared for a bullish reversal.

Gold Prices Forecast: Technical Analysis

Gold (XAU/USD) trades at $2,656.10, down 0.09%, indicating mild bearish sentiment. The price is below the pivot point of $2,659.52 and the 50-day EMA at $2,659.49, suggesting further downside potential.

Immediate support is $2,647.30, followed by $2,640.15 and $2,630.95. If gold breaks below these levels, it could test its 200-day EMA at $2,628.98.

On the upside, gold would need to clear $2,665.87 to target higher resistance at $2,674.13 and $2,683.18. A break above $2,660 could trigger a bullish shift, but until then, the downward channel remains in play.