Gold (XAU/USD) Price Forecast & Predictions

Gold starts the week near $4,410 after ending last week around $4,429. Strong U.S. job growth has increased expectations of a rate hike in September, while the 10-year Treasury yield closed Friday near 4.79%. Gold also remains below the 200-day moving average near $4,530. In my view, the outlook for gold is neutral in the short term as the price remains below $4,530. The key supports are $4,400 and $4,300 in the short term. A daily close below $4,300 could push the price toward $4,160 and then $4,000. Gold must recover above $4,530 to ease the selling pressure. This recovery would open the way toward $4,800. The U.S. PPI report on Thursday and CPI report on Friday should determine whether gold breaks the current range before the Fed meeting on September 15-16.

The short-term downside risk in gold has increased after the U.S. economy added 162,000 jobs in August, while unemployment remained unchanged at 4.1%. The market now expects a 58% chance of a rate hike in September. Hot inflation data could raise expectations of a rate hike and support US Treasury yields. This may increase the pressure on gold. However, softer inflation could reduce the chance of a hike and support a recovery above $4,530. The US dollar index is also consolidating below 99.40 and has not produced a decisive bullish breakout. 

The conflict between the U.S. and Iran creates two opposing forces for gold. The uncertainty from geopolitical events in the Middle East creates safe-haven demand for gold. But this conflict has also pushed crude oil prices higher. Higher oil prices keep inflation risks and may encourage the Fed to increase interest rates. This may put downward pressure on gold through higher Treasury yields. But the effect of interest rates is stronger than the effect of the safe-haven in the short term.

A daily close above $4,530 would shift the short-term view from neutral to bullish. This move would show that gold has recovered from the 200-day moving average and could open the way toward $4,800 and then $5,000. A daily close below $4,300 would confirm that the selling pressure is strong and price may drop to $4,160 and $4,000. A sustained break below $4,000 would weaken the gold outlook in the medium term. Softer readings for CPI and PPI may reduce the probability of a rate hike in September and support a bullish scenario for gold. But the hot inflation readings may strengthen the bearish scenario for gold. A major escalation in the conflict between the U.S. and Iran could increase safe-haven demand.