Gold (XAU) Price Forecast: Bullish Momentum Builds Amid China Stimulus Hopes

Gold Prices Edge Higher on China’s Stimulus and Fed Rate Cut Expectations

Gold prices traded slightly lower on Monday, sitting above a key support level as traders focused on China’s fiscal stimulus and anticipated rate cuts from the U.S. Federal Reserve. Following China’s announcement of increased debt issuance to support its struggling economy, the market speculated on the potential impact of further stimulus measures, which could boost demand for gold.

At 11:38 GMT, XAU/USD is trading $2654.70, down $2.48 or -0.09%.

Gold Strengthens on Pivotal Support Level

Gold crossed the $2645.01 mark, now serving as a critical short-term support level. If prices sustain above this level, there is room for upward momentum, potentially pushing towards the all-time high of $2685.64. However, any failure to hold above this level could see a pullback towards the $2616.25 to $2605.28 support zone.

China’s announcement over the weekend of increased debt issuance aimed at reviving its slowing economy has driven optimism, although investors are waiting for more clarity on the scale of the measures. Tim Waterer, chief market analyst at KCM Trade, noted that while China’s move signals a healthier economy in the long term, the market needs to see concrete steps before confidence can fully return to gold demand.

Fed Rate Cuts in Focus Amid Flat Inflation Data

U.S. inflation data released last week has also fueled expectations of a rate cut at the Fed’s upcoming meeting. The Producer Price Index (PPI) remained unchanged in September, reinforcing the case for a 25 basis point cut at the November Federal Reserve meeting. With a low-interest-rate environment, zero-yielding assets like gold become more attractive, further supporting the price.

However, a strong U.S. dollar, which gained 0.1%, continues to pose a headwind for gold. A stronger dollar makes dollar-denominated gold less appealing for foreign investors, limiting gold’s potential upside despite positive market conditions.

Market Forecast: Gold Outlook Remains Cautiously Bullish

Given the current factors, the outlook for gold remains cautiously bullish in the short term. The stimulus package from China, combined with expectations for a U.S. rate cut, could provide the needed momentum to challenge record highs. However, much depends on the Federal Reserve’s next move and any additional details on China’s fiscal measures. If these factors align favorably, gold prices could break resistance, but traders should be prepared for volatility if key support levels are tested.