Gold (XAU) Price Forecast Will Key U.S. Data Ignite a Bullish Rally Next Week?

Gold Prices Set for Continued Volatility as Global Risks and Economic Data Dominate

Gold prices maintained their upward trend this week, trading near record highs of $2,758.37, as investors sought refuge in the face of global uncertainties and evolving economic conditions. With the precious metal up over 32% year-to-date, traders are closely watching both geopolitical risks and upcoming U.S. economic data for indications of potential price direction. Despite pressures from a strengthening dollar and rising Treasury yields, gold has continued to attract safe-haven flows, underscoring its resilience in a complex market environment.

U.S. Election and Geopolitical Tensions Fuel Safe-Haven Demand

Gold’s appeal as a safe-haven asset has been bolstered by intensifying geopolitical tensions, particularly in the Middle East, and the nearing U.S. presidential election. As opinion polls indicate a tight race between President Donald Trump and Vice President Kamala Harris, market participants are bracing for potential election-related volatility. Additionally, the ongoing Israel-Hezbollah conflict has heightened global security concerns, driving demand for safe-haven assets like gold. This elevated risk backdrop has helped gold remain resilient, even as traditional headwinds like a robust U.S. dollar and elevated Treasury yields might typically weigh on prices​​.

Last week, XAU/USD settled at $2747.22, up $25.32 or +0.93%.

Strong Dollar and Treasury Yields Pose Headwinds

The dollar index reached 104.24, marking its fourth consecutive week of gains, supported by strong U.S. economic data and expectations for a cautious Federal Reserve stance on rate cuts. With the 10-year Treasury yield peaking at 4.24%, safe-haven flows into gold appear counterintuitive, as higher yields usually dampen non-yielding assets like gold. However, the strength in the dollar and yields has been offset by the uncertainty-driven demand for gold, signaling a unique market environment where traditional correlations are muted​​​.

Key U.S. Economic Data in Focus

The U.S. economic calendar next week, featuring GDP and the core PCE deflator, will be critical for setting near-term expectations for the Federal Reserve’s interest rate trajectory. A strong GDP report, projected to show 3% growth for a second consecutive quarter, might reinforce the Fed’s cautious approach, possibly dampening gold’s rally if markets perceive less urgency for aggressive rate cuts. However, should inflation indicators signal persistent pressures, the Fed could face increased calls to act more decisively. Meanwhile, Friday’s jobs report is expected to reflect the impact of factors like Boeing’s strike and hurricane disruptions, potentially affecting the Fed’s view on labor market resilience and influencing rate expectations​​.

Physical Demand Weakens in Key Asian Markets

Despite its strong price performance, physical demand for gold in Asia has softened. High prices have led to increased discounts in China, with Indian buyers also reducing purchases. This dip in demand may limit further price increases unless other catalysts, such as renewed geopolitical risks or stronger-than-expected ETF inflows, provide additional support. Nonetheless, ETF inflows have remained solid, contributing to the metal’s overall uptrend​​.

Market Forecast: Cautious Bullish Outlook

Gold’s short-term outlook remains cautiously bullish, supported by safe-haven demand and potential dovish signals from the Federal Reserve. However, traders should be mindful of key technical levels, with support $2604.39 and psychological resistance at $2,800, which could indicate directional shifts. Any unexpected developments in the Middle East or shifts in U.S. economic indicators may amplify volatility, but overall, gold remains well-positioned for continued gains, especially if global risks persist and Fed rate cuts appear increasingly likely.

Next week’s market response to U.S. data and geopolitical events will be critical for gold’s trend. A breakout above $2,760 could set the stage for further upside into $2800, while a drop below $2,708.75 may put $2604.39 on the radar. Traders should watch these levels closely for indications of the metal’s resilience amid evolving global challenges.