Gold (XAU) Forecast: Key US Data Eyed as Prices Climb

Gold Prices Rise as Dollar Weakens, Investors Eye Key US Data

Gold prices increased on Tuesday, driven by a declining dollar and weakening Treasury yields. Investors are closely watching upcoming US economic data for clues about the Federal Reserve’s interest rate cut timeline.

At 10:15 GMT, XAU/USD is trading $2407.80, up $11.38 or +0.47%.

Key Economic Indicators

Traders are focusing on Thursday’s second-quarter GDP report and Friday’s June personal consumption expenditures (PCE) data. These reports are expected to provide insights into future monetary policy decisions by the Federal Reserve.

The PCE index, the Fed’s preferred inflation gauge, could significantly influence guidance issued at next week’s Fed meeting. While no rate cut is expected, markets anticipate clues about potential future monetary policy easing.

Market Expectations

Traders currently price in a high probability of the first interest rate cut occurring in September. However, uncertainty persists regarding additional cuts this year.

Fed Chairman Jerome Powell recently suggested the central bank might not wait for inflation to reach 2% before cutting rates. This statement has further fueled market speculation about the timing and frequency of potential rate cuts.

Goldman Sachs Bullish on Gold

Goldman Sachs maintains a bullish outlook on gold, citing potential Fed rate cuts and strong Chinese demand as key drivers. The bank forecasts gold prices to reach $2,700 by 2025, a 12% increase from current levels.

China’s central bank has been aggressively purchasing gold, driven by concerns about US financial sanctions and sovereign debt sustainability. This trend, combined with structural changes in the Chinese market, is creating what Goldman Sachs describes as an “unshakeable bull market” for gold in China.

Market Forecast

The short-term outlook for gold appears bullish. The combination of a weakening dollar, falling Treasury yields, and anticipation of potential Fed rate cuts creates a favorable environment for gold prices. However, traders should remain vigilant, as upcoming economic data could introduce volatility in the precious metals market.

Technical Analysis

XAU/USD is edging higher on Tuesday, trying to break a four-day losing streak. Traders are also trying to bounce back from last week’s potentially bearish closing price reversal top.

The short-term range is $2286.83 to $2483.74. The price action the past two sessions indicates traders are trying to establish support on its pivot at $2385.28. A failure to hold this level won’t be a disaster with the 50-day moving average at $2360.69 coming in right under it. Crossing to the weakside of the MA could trigger a steep break into the June 7 bottom at $2286.83.

On the upside, a pivot at $2433.84 is the intial target.