Gold (XAU) Price Forecast: Tight Range Signals Breakout – Will CPI Be the Catalyst?

Gold Prices Flat as Traders Await Key U.S. CPI Data

Gold prices remained steady in early Tuesday trade, with volume light as many investors hold positions ahead of the U.S. Consumer Price Index (CPI) report set to be released on Wednesday. The market’s focus is divided between the inflation data and uncertainty surrounding the size of the Federal Reserve’s interest rate cut at next week’s meeting. Traders are particularly cautious, leading to a subdued market performance as they await clarity on these key events.

At 10:51 GMT, XAU/USD is trading $2506.68, up $0.28 or +0.01%.

Gold Market Rangebound as Traders Eye Technical Levels

Gold prices have been trading within a tight range since August 22, constrained by resistance at the record high of $2531.77 and support at $2470.85. The market is hovering near a pivot point at $2501.31, leaning slightly to the upside, but lacking strong momentum. Should prices break lower, the next key technical support level to watch is the 50-day moving average at $2446.29. Traders are reluctant to make significant moves ahead of the CPI data, which could trigger volatility depending on how inflation aligns with expectations.

Investors Look to U.S. Inflation Data for Fed Clues

Wednesday’s U.S. CPI report is anticipated to show a 0.2% rise for August, identical to the previous month, according to a Reuters poll. This data could heavily influence the Federal Reserve’s upcoming rate decision. Markets currently predict a 73% chance of a 25 basis point cut at the September 18 meeting, with a smaller probability of a 50 basis point reduction. Should inflation data surprise to the upside, expectations for a more aggressive cut could increase, which may drive further inflows into gold-backed ETFs and push prices toward $2600 by year-end.

Treasury Yields Steady as Markets Await Inflation Report

Treasury yields remained flat on Monday as investors positioned themselves for the incoming CPI data. The 10-year Treasury yield held near 3.706%, while the 2-year yield inched higher to 3.681%. Recent economic reports have shown weaker-than-expected results, such as nonfarm payrolls, which missed estimates. This has bolstered expectations for a Fed rate cut, although uncertainty remains regarding the magnitude. If inflation data disappoints, yields could fall further, providing additional support for gold prices.

Market Forecast: Gold to Remain Supported by Lower Rates and Geopolitical Concerns

Looking ahead, gold is expected to remain buoyant, supported by lower interest rates and heightened geopolitical risks. A likely 25 basis point Fed rate cut would maintain gold’s appeal as a non-yielding asset, while persistent concerns about the global economic slowdown could add further buying interest.

Additionally, seasonal demand for physical gold from India and China is expected to provide a tailwind for prices. While the market may remain rangebound in the short term, the overall outlook for gold remains bullish, with potential for prices to test $2600 per ounce by the end of 2024.