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Gold Price Forecast: XAU/USD eyes record highs at $2,532 amid dovish Fed, geopolitical risks

  • Gold price holds recent gains above $2,500 early Monday amid the Mid-East escalation.
  • The US Dollar nurses losses with US Treasury bond yields on dovish Fed outlook.   
  • Gold price looks to retest all-time highs as the daily technical setup favors buyers.

Gold price consolidates the previous week’s gains above $2,500 at the start of the week on Monday. Gold buyers catch a breather after recording the second consecutive weekly gain while reverting toward the all-time high of $2,532.

Gold price looks to US data for more gains

The underlying buoyant tone around Gold price is mainly attributed to the sustained US Dollar weakness alongside negative US Treasury bond yields, following the dovish remarks delivered by US Federal Reserve (Fed) Chairman Jerome Powell at the Jackson Hole Symposium on Friday.

Powell clearly confirmed that the Fed’s easing cycle will begin in September, noting that "the time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

"The upside risks to inflation have diminished. And the downside risks to employment have increased. As we highlighted in our last FOMC statement, we are attentive to the risks to both sides of our dual mandate,” Powell added.

These comments were enough to seal in a September Fed rate cut, with markets currently pricing in a 38% probability of 50 basis points (bps) rate reduction in September while the odds of a 25 bps cut stand at 62%, the CME Group’s FedWatch Tool showed on Monday. The non-interest-beating Gold price tends to benefit from a low interest-rate regime.

Meanwhile, the traditional safe-haven, Gold price, also capitalizes on escalating geopolitical tensions in the Middle East after Israel launched a preemptive airstrike on Hezbollah in southern Lebanon on Sunday, reportedly using 100 jet fighters to hit 40 locations, as Hezbollah was said to launch a large-scale missile and rocket attack on northern and central Israel with the intended target being Mossad, the Israeli spy agency.

Adding further to the haven demand for the bright metal, Axios reported that "Gaza talks will continue in the coming days through working groups to address issues and remaining details,” as ceasefire talks in Cairo conclude without any agreement.

Amidst these favorable fundamental factors, Gold price remains exposed to upside risks, with the technical setup on the daily chart also leaning in favor of buyers. The next push higher in Gold price is likely to be driven by the top-tier US Durable Goods Orders data due later in American trading on Monday.

Gold price technical analysis: Daily chart

The short-term technical outlook for Gold price continues to suggest upside risks while buyers hold fort above the triangle resistance-turned-support at $2,470.

Gold price holds its upside break from a symmetrical triangle confirmed a couple of weeks ago. The 14-day Relative Strength Index (RSI) sits comfortably above 50, currently near 63, pointing to more gains in the offing.

Gold buyers need to recapture the record high of $2,532 to take on the next key barrier at the $2,550 level.

Acceptance above the latter could challenge the $2,600 round level en route to the triangle target, measured at $2,660.

Conversely, if the Gold price fails to sustain at higher levels, a correction could unfold toward the $2,500 threshold, below which Friday’s low of $2,485 will be challenged.

A sustained breach of the latter could expose the downside toward the abovementioned triangle resistance-turned-support at $2,470.

Economic Indicator

Durable Goods Orders

The Durable Goods Orders, released by the US Census Bureau, measures the cost of orders received by manufacturers for durable goods, which means goods planned to last for three years or more, such as motor vehicles and appliances. As those durable products often involve large investments they are sensitive to the US economic situation. The final figure shows the state of US production activity. Generally speaking, a high reading is bullish for the USD.

Read more.

Next release: Mon Aug 26, 2024 12:30

Frequency: Monthly

Consensus: 4%

Previous: -6.6%

Source: US Census Bureau

Author

Dhwani Mehta

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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