Gold Price Forecast: XAU/USD’s struggle with $4,135 continues ahead of US data
- Gold consolidates Monday’s rebound above $4,100 early Tuesday, looks to $4,200.
- US Dollar stalls its uptrend as December Fed rate cut bets regrow ahead of US data.
- Gold needs a daily closing above the 50% Fibo level of $4,134 for additional upside.
Gold is catching a breather in Tuesday’s Asian trading, after having rebounded over 1.5% on Monday. The next push higher in Gold now hinges on the upcoming delayed US data releases.
Gold: In search of fresh fundamental impetus
Markets eagerly await the September Retail Sales and Producer Price Index (PPI) data from the United States (US) due to be released later on Tuesday, followed by the Conference Board (CB) Consumer Confidence and Pending Home Sales reports, for a fresh take on the revival of expectations surrounding an interest cut by the Federal Reserve (Fed).
Markets currently price in an 81% probability of such a move, up from around 42% and 71% seen a week ago and last Friday, respectively.
The recent speeches from Fed policymakers brought December Fed rate cut bets back on the table.
New York Fed President John Williams said Friday that “US interest rates could fall without putting the Fed's inflation goal at risk, while helping guard against a slide in the job market,” per Reuters.
On Monday, Governor Christopher Waller also favored a rate cut before the end of the year, and expressed concerns about a "still fragile" labor market.
San Francisco Fed President Mary Daly also noted on Monday that
“the Fed shouldn’t hold off on cutting rates now out of fear it may need to reverse course later."
The revival in the Fed rate cut expectations for next month powered the rebound in Gold a day ago, with traders now consolidating the upswing, digesting the developments surrounding "constructive" talks in Geneva between the West and Ukraine over the peace deal with Russia.
The White House stated that the discussions constituted "a significant step forward" toward a resolution of this conflict.
Meanwhile, Ukrainian President Volodimir Zelenski praised the progress on Monday, but considered that "much more" is needed to achieve "real peace" with Russia.
Looking ahead, the US economic releases and the US-Ukraine geopolitical headlines will continue to drive the Gold price action, while Fedspeak will also be closely scrutinized as it has the potential to alter the markets’ pricing of the Fed’s further monetary policy easing.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,134.03. The 21-day Simple Moving Average (SMA) rises above the 50-, 100- and 200-day SMAs, while the longer averages also advance as price holds over them. The 21-day SMA at $4,053.08 offers nearby dynamic support. The RSI (14) at 57.72 stays above the midline, hinting at firming momentum.
Measured from the $4,381.17 high to the $3,885.84 low, the 50% retracement at $4,133.50 is being tested, with the 61.8% retracement at $4,191.95 acting as a higher barrier. A daily close above the latter would signal the bearish retracement is fading and could extend gains, while failure to clear $4,133.50 would keep rebounds capped and risk a return toward the 21-day SMA.
(The technical analysis of this story was written with the help of an AI tool)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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Author
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.
