Gold (XAU) Price Forecast: Will Powell’s Jackson Hole Speech Spark a Gold Rally?

Gold Prices Retreat as Fed Minutes Signal Potential Rate Cuts

Gold prices edged lower on Thursday, easing from their recent record highs as traders reacted to the latest minutes from the U.S. Federal Reserve’s July meeting. The minutes showed that officials were strongly inclined toward an interest rate cut at the September policy meeting, a move that had already been largely anticipated by the market. Investors are now focused on Federal Reserve Chair Jerome Powell’s upcoming speech at the Jackson Hole symposium for further guidance on the central bank’s policy.

At 10:11 GMT, XAU/USD is trading $2507.46, down $4.80 or -0.19%.

Bond Yields Rise as Rate Cut Expectations Increase

U.S. Treasury yields rose on Thursday, with the 10-year yield climbing more than 2 basis points to 3.799% and the 2-year yield up by 1 basis point to 3.929%. The increase in yields follows the Fed’s dovish minutes and a significant downward revision in U.S. payroll data, both of which strengthened expectations for a rate cut in September. According to the CME Group’s FedWatch Tool, traders now see a 66% chance of a 25-basis-point rate cut, with a 38% probability that the cut could be as deep as 50 basis points.

Dollar Weakens as Rate Cut Speculation Grows

The U.S. dollar continued to weaken, trading near its lowest levels in over a year against major currencies like the euro and sterling. The dollar index hovered around 101.14, dipping below the 145 yen mark as Treasury yields declined. The dovish stance of the Federal Reserve, combined with signs of a weakening U.S. job market, has increased expectations for a rate cut, putting additional pressure on the dollar.

Focus Shifts to Powell’s Jackson Hole Speech

Market participants are now closely watching Powell’s speech at Jackson Hole on Friday, where he is expected to provide insights into the Fed’s future policy moves. With recent data showing the U.S. added far fewer jobs than initially reported, traders are particularly interested in any signals about the size of the upcoming rate cut and the potential for further reductions at subsequent meetings.

Market Forecast: Bullish Bias on Gold With Caution for ‘Buy the Rumor, Sell the Fact’ Reaction

Given the Fed minutes and the growing likelihood of a rate cut, gold prices are expected to maintain a bullish bias in the near term. The metal’s retreat from record highs appears to be a temporary pullback, with the prospect of lower interest rates likely to provide ongoing support.

However, traders should be mindful of a potential “buy the rumor, sell the fact” scenario. If Powell’s Jackson Hole remarks do not exceed market expectations or if the anticipated rate cut is already fully reflected in prices, gold could see a temporary selloff as traders move to lock in gains. On the other hand, if the Fed signals more aggressive easing than expected, gold prices could continue to rise. While the overall outlook remains positive, traders should stay alert to market reactions following key Fed communications.

Technical Analysis

The main trend is up, but two-days of consolidation suggests a cautious trade. A move through $2531.77 will signal a resumption of the uptrend. A failure at $2432.22 will change the main trend to down, according to the daily swing chart.

The major support is the 50-day moving average at $2399.94. If this fails to hold then the 200-day moving average at $2217.85 will become the primary downside target.