Gold (XAU) Forecast: Gold Price Hovers Near Record High on Rate Cut Expectations

Gold Approaches New Peak as Rate Cut Expectations Intensify

Gold prices are near record highs, driven by increasing expectations of a Federal Reserve interest rate cut in September. The precious metal reached $2,483.74 in the previous session, with market sentiment pointing strongly towards a positive outlook.

At 10:00 GMT, XAU/USD is trading $2465.61, up $6.80 or +0.28%.

Fed Officials Hint at Impending Rate Cuts

Several Federal Reserve officials have suggested that rate cuts may be on the horizon. Fed Governor Christopher Waller and New York Fed President John Williams both indicated a narrowing timeline for looser monetary policy. Richmond Fed President Thomas Barkin expressed optimism about widespread decreases in inflation.

Market Predictions and Economic Influences

CME’s FedWatch Tool indicates markets are pricing in a 25-basis-point reduction at the Federal Reserve’s September meeting with over 90% certainty. This expectation, along with a potential decline in the U.S. Dollar’s value and ongoing global tensions in Europe and the Middle East, continues to bolster gold prices.

Central Bank Purchases and ETF Growth

The World Gold Council reported that global physically backed gold exchange-traded funds experienced inflows for the second consecutive month in June. Ryan McIntyre, senior portfolio manager at Sprott Asset Management, suggests a fresh surge of demand could be emerging through ETFs, especially from financial advisers and institutions.

Price Projections and Potential Challenges

Citi projects gold to reach $2,700-$3,000 per ounce over the next 6-12 months. However, some analysts warn that a potential Donald Trump presidency could negatively affect investor demand for gold, as his policies might reverse recent drops in inflation.

Treasury Yields and Economic Indicators

U.S. Treasury yields increased on Thursday as the market analyzed Fed officials’ statements. While traders aren’t overly concerned with this movement yet, future attention may turn to the likelihood of a December rate cut and potential economic slowdown worries. Upcoming jobless claims data, with economists predicting 229,000 claims, could offer additional insights into economic conditions and impact gold prices.

Market Outlook

The short-term forecast for gold remains positive, supported by rate cut expectations and global uncertainties. However, traders should be alert to potential “buy the rumor, sell the fact” situations as the September Fed meeting approaches. Moreover, changes in Treasury yields and forthcoming economic data releases could sway gold’s direction in the coming weeks.

Technical Analysis

Although XAU/USD is in an uptrend, it remains vulnerable to a near-term correction with the pivot at $2385.29 the first downside target, followed by the uptrending 50-day moving average at $2358.09. With the trend up and investors seemingly locked into a “buy the dip” mentality, a pullback into this area will likely be attractive to long-term investors.

It’s always good to note the distance from high to new high because it gives us an idea of how investors are treating current price levels. Based on the May 20 top at $2450.13 to yesterday’s high at $2483.74, the market has gained $49.34. This was $30.80 more than the gain from high to high during April to May. This is telling us that the buying is still strong with traders willing to buy strength.