Gold (XAU) Price Forecast: Bullish Outlook as Fed Rate Bets Cut Lifts Bullion

Gold Prices Rise as Markets Digest Fed’s Rate Cut

Spot gold is ticking higher on Thursday, following a record high of $2,600.29 hit during the previous session before retreating to $2,546.86. Gold is showing resilience after the Federal Reserve’s surprise decision to implement a super-sized 50 basis point interest rate cut, which has bolstered sentiment for the precious metal.

Our technical analysis indicates key support at $2,531.77, with the 50-day moving average at $2,473.18. The next major resistance levels lie at $2,649.43 and $2,660.90, where bullish traders may aim next.

At 11:09 GMT, XAU/USD is trading $2586.86, up $27.56 or +1.08%.

Federal Reserve’s Rate Cut Drives Gold Prices Higher

The Federal Reserve’s larger-than-expected 50 basis point rate reduction has renewed interest in gold. By reducing rates to a 4.75%-5% range, the Fed is showing its commitment to keeping unemployment low as inflation pressures subside. Fed Chair Jerome Powell emphasized that the U.S. economy remains strong, despite this adjustment, pointing to stable employment indicators like the 4.2% unemployment rate.

This rate cut has weakened the U.S. dollar, supporting demand for dollar-denominated gold. Bullion is typically favored in a lower interest rate environment as it becomes more attractive against other assets that yield returns. With traders now expecting another rate reduction in November, gold is likely to benefit further if economic data continues to weaken.

Treasury Yields Steady Despite Market Volatility

U.S. Treasury yields have been relatively stable in the aftermath of the Fed’s decision. Investors are weighing the impacts of this monetary shift and awaiting further data. Despite the volatility, the Fed’s forward guidance suggests continued cuts through 2024, with an additional 50 basis points anticipated. This dovish outlook could continue to drive safe-haven demand for gold as Treasury yields remain subdued.

Geopolitical Tensions and Softening Data Could Lift Gold Further

Geopolitical risks in the Middle East remain a key factor influencing gold prices. Renewed tensions in Lebanon, where Hezbollah devices exploded again on Wednesday, are creating an undercurrent of unease in global markets. This adds to gold’s appeal as a hedge against geopolitical uncertainty. Meanwhile, upcoming U.S. jobless claims data could act as a catalyst for further price movement, especially if the numbers reflect a weakening labor market.

Gold Market Forecast

In the short term, gold prices are expected to remain bullish, with key resistance levels at $2,649.43 and $2,660.90 in focus. A weaker dollar, coupled with expectations of another rate cut, creates a favorable environment for gold bulls. Additionally, any escalation in geopolitical tensions or further signs of economic softness could drive prices higher toward the $2,700 mark. Traders should watch for key economic reports, including initial jobless claims and home sales data, as these could influence near-term gold movements.