Gold (XAU) Price Forecast: Will Powell’s Speech Spark a Gold Rally or Trigger a Sell-Off?

Gold Edges Higher Ahead of Powell’s Speech, Set for Weekly Decline

Gold prices are ticking upward on Friday after a sharp decline in the previous session, driven by profit-taking and position adjustments. Traders are cautious as they await a pivotal speech from Federal Reserve Chairman Jerome Powell at 14:00 GMT, which is expected to influence market sentiment.

At 10:15 GMT, XAU/USD is trading $2497.48, up $12.76 or +0.51%.

Gold Prices Stabilize After Decline

After reaching an all-time high of $2,531.60 on Tuesday, gold has retraced nearly 1% this week. The pullback is attributed to a stronger U.S. dollar and a rebound in Treasury yields, following an unexpected rise in the unemployment rate. Despite this, gold managed to inch higher on Friday, reflecting investor uncertainty and the potential for significant price moves depending on Powell’s remarks.

Fed’s Rate Cut Signals and Market Reactions

Market participants are closely monitoring Powell’s address at the Jackson Hole symposium for clues on the Fed’s future interest rate decisions. Traders have largely priced in a 76% probability of a 25-basis-point rate cut in September, with some speculating on a more substantial 50-basis-point reduction. This expectation has kept gold’s appeal intact, as a lower interest rate environment typically supports non-yielding assets like bullion.

However, there is concern that Powell’s speech could lead to a “buy the rumor, sell the fact” scenario, where gold could face selling pressure if the anticipated rate cut is confirmed without any surprises. This pattern may contribute to increased volatility and could limit gold’s upside potential in the near term.

Cautious Optimism Among Gold Traders

Tim Waterer, Chief Market Analyst at KCM Trade, noted, “Gold’s stay below $2,500 could be temporary, with the fundamentals still appearing favorable for the precious metal.” However, the market remains on edge as any unexpected remarks from Powell could trigger significant price moves. A more dovish stance from the Fed could boost gold, while a hawkish tone might extend the metal’s recent losses.

Market Forecast: Potential for Bullish Momentum, but Beware of Reversal

If Powell confirms the anticipated rate cut, gold prices may resume their upward trend, potentially challenging the $2,500 level again. However, traders should be mindful of a potentially bearish closing price reversal top on the weekly chart if gold ends the session lower today. Such a pattern could signal a deeper correction, making a bearish scenario likely if Powell suggests that the economy is stable enough to delay cuts. As a result, traders should prepare for a session with the potential for significant price swings depending on the Fed’s direction.

Technical Analysis

On the daily chart, XAU/USD is hovering just above a key short-term pivot at $2482.00. If this level fails then look for a steep break into a second pivot at $2442.48.

A trade through $2432.22 will change the trend to down with a quick break into the 50-day moving average at $2402.80 likely to follow. If this indicator fails then look out to the downside.