Gold (XAU) Price Forecast: Will Prices Hit $2,600 as Powell Signals Rate Cut?

Gold Pauses After Surging to Record Highs Above $2,500

Gold prices have retreated slightly after reaching a new all-time high above $2,500 per ounce in the previous session. The surge was driven by strong safe-haven demand and growing expectations of an imminent U.S. interest rate cut. Investors are now closely watching the Federal Reserve’s next moves, particularly Chair Jerome Powell’s upcoming speech at the Jackson Hole symposium on Friday.

At 11:42 GMT, XAU/USD is trading $2491.97, down $16.17 or -0.64%.

Focus on Powell’s Speech at Jackson Hole

Market participants are eagerly awaiting Powell’s speech, which is expected to provide key insights into the Fed’s monetary policy direction. UBS analyst Giovanni Staunovo noted that despite gold’s recent peak, prices could rise even further, potentially reaching $2,600 per ounce by the end of the year. Powell is anticipated to signal a rate cut, likely favoring a 25 basis point reduction over a more aggressive 50 basis point cut.

The Jackson Hole symposium, a long-standing tradition for central bankers, has historically been used by Fed Chairs to signal significant policy shifts. Powell’s speech is expected to address the Fed’s dual mandate of maintaining price stability and maximum employment, with a particular focus on how the Fed plans to navigate the current economic landscape as inflation cools and the job market weakens.

Market Anticipates Fed’s Next Move

The recent economic data has reinforced the belief that the Fed will cut rates in September. Strong U.S. retail sales and lower-than-expected unemployment claims, combined with mild inflation readings, have bolstered confidence in the U.S. economy’s resilience. The CME FedWatch tool indicates that traders are fully pricing in a 25 basis point rate cut next month, with a smaller chance of a 50 basis point reduction.

Gold Prices Forecast

Gold has surged over 20% this year, driven by expectations of U.S. interest rate cuts and rising geopolitical tensions, particularly in the Israel-Iran-Hamas conflict. Given the persistent safe-haven demand and central bank buying, gold prices are likely to remain elevated. The outlook for gold remains bullish, with prices expected to climb higher as the Fed eases monetary policy and global uncertainties persist. Traders should keep a close eye on the Fed’s upcoming decisions, as they will be crucial in determining the next move for gold prices.

Technical Analysis

The main trend is up according to the daily swing chart. A trade through $2432.22 will change the trend to down. A move through $2509.82 will signal a resumption of the uptrend.

Even if the trend changes to down, the move is not expected to last long because of strong support provided by the 50-day moviing average at $2387.97. However, momentum could shift quickly if this indicator fails as support.