Gold Price Forecast: XAUUSD eyes upside above $1,730 as 1% Fed rate hike gets off the table

Gold price (XAUUSD) is focused to recapture its weekly high near $1,740.00 after a firmer recovery. The precious metal gained strength last week after slipping to near the critical support of $1,680.00. A two-day stellar recovery by the gold bulls has resulted in a more than 3.30% recovery in the gold prices after re-testing the 11-month low of $1,679.80.

DXY tumbles as 1% rate hike odds get off the table

The US dollar index (DXY) surrendered the opening gains on Friday after the expectations of a 1% rate hike by the Federal Reserve (Fed) got trimmed tremendously. Thanks to the downbeat S&P PMI data and diving inflation expectations, which trimmed the odds of 100 basis points (bps) interest rate hike by the Fed in its monetary policy meeting on Wednesday.

After the long-run inflation expectations slipped to 2.8% from June’s print of 3.1%, investors placed bets on a consecutive 75 bps rate hike by the Fed rather than placing money on a 1% rate hike.

Downbeat S&P PMI data

On Friday, the S&P released the PMI data, which remained downbeat on major aspects. The Global Composite PMI remained extremely lower at 47.5 than the expectations of 51.7 and the prior release of 52.3. Expanding to the Manufacturing and Services front, the former catalyst landed at 52.3 vs. 52.7 the former figure, while the latter was recorded at 47 vs. 52.7 printed earlier. A downbeat PMI indicates that the Fed will not go entirely hawkish as economic activities are not favorable.

Other than Fed’s interest rate decision, the focus of investors will also remain on US Durable Goods Orders, which are due on Wednesday. The economic data is seen at -0.2%, significantly lower than the prior release of 0.8%.