Gold (XAU) Price Forecast: US Inflation Report to Decide Gold’s Next Move

Gold Prices Flat as Traders Await Key US Inflation Data

Gold prices traded nearly flat on Monday as market participants remained cautious, awaiting this week’s critical inflation reports to gauge the Federal Reserve’s next move on interest rates. Following Friday’s mixed U.S. jobs report, traders are assessing how upcoming inflation data will impact the Fed’s decision. Gold has been rangebound in recent weeks, hovering between $2531.77 and $2470.85, and currently trades below the psychological $2500 level, between a technical support level at $2482.00 and a technical resistance level at $2501.31.

At 10:29 GMT, XAU/USD is trading $2495.07, down $2.50 or -0.10%.

Dollar Strength Pressures Gold Prices

Gold eased slightly as the U.S. dollar index (DXY) rose 0.4%, making dollar-denominated bullion less attractive for holders of other currencies. Investors are closely watching for a potential breakout in the dollar through last week’s high of 101.917, with a further upside target at 102.040. The dollar’s strength reflects uncertainty over the size of the Fed’s anticipated rate cut at its upcoming meeting.

Fed Policymakers Split on Rate Cuts

Fed officials have signaled that a rate cut is on the horizon, but the scale remains undecided. With the labor market sending mixed signals, some policymakers, like Fed Governor Christopher Waller, have indicated they are open to consecutive or larger cuts if incoming data justifies it. Wednesday’s Consumer Price Index (CPI) report is expected to provide more clarity on whether inflation is cooling enough to warrant aggressive easing.

Gold’s Outlook Tied to Inflation Figures

Gold, which performs well in a low-interest-rate environment, could rally if inflation data surprises to the downside, leading to increased expectations of a larger Fed rate cut. According to market analysts like Carlo Alberto De Casa of Kinesis Money, if inflation comes in significantly lower than expected, gold could surge to new all-time highs. However, even if the Fed sticks to a 25 bp cut, gold prices are unlikely to see a sharp decline, as rate cuts are largely priced in.

Market Forecast

In the short term, gold prices are likely to remain rangebound, with direction depending heavily on Wednesday’s inflation print. A lower-than-expected CPI could push gold higher, potentially challenging resistance near $2530. However, if inflation aligns with market expectations, gold may continue trading sideways, with strong support around $2470. Traders should prepare for potential volatility as key economic data shapes the Fed’s rate decision. Overall, a mildly bullish outlook for gold remains, driven by expectations of continued rate cuts through year-end.