Gold forecasts and analysis
- Fed Chairman Powell increases his cautious bets.
- The US ISM Services Purchasing Managers’ Index (PMI) and Non-Farm Payrolls (NFP) report will be in the spotlight next week.
- Gold may be heading lower in the overbought zone next week.
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Fundamental forecast for XAU/USD
Gold prices rose on Friday after the US ISM Manufacturing PMI came in disappointing, followed by Federal Reserve Chairman Jerome Powell providing some less aggressive messages, which could signal the peak of the Fed’s lifting cycle. Although Mr. Powell tried to refrain from sounding overly pessimistic, the market did not heed the sentiment. Some key phrases include:
“Fed funds range well into restricted territory.”
“It’s too early to say that Monetary policy Restricted enough.”
“I expect spending and production to slow over the next year.”
From a money market perspective (see table below), interest rates are expected to be below 4% by December 2024. The recent string of US economic data has contributed to this narrative along with a decline in US Treasury yields as the end of the two years approaches. Towards the 4.5% support level.
Embedded Federal Reserve Funds Futures
Source: Refinitiv
Next week will see the focus on ISM Services Purchasing Managers’ Index (PMI) data. The most important of the two PMI releases is that the United States is primarily a services-driven economy. Gold bulls will see a rise to 52 with upcoming week’s highlights from the Non-Farm Payrolls (NFP) report. The strong non-farm payrolls figure could reflect gold’s recent rally, while another supporter of the upside stems from the resumption of the war between Israel and Hamas in Gaza. The safe-haven appeal of bullion has returned after the recent ceasefire and any escalation could keep prices high.
Golden economic calendar
source: DailyFX
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Technical Analysis
Gold price daily chart
Chart prepared by Warren VenketasTrading View
The daily XAU/USD price action appears to be heading towards the March 2022 and May 2023 resistance zone around the area. 2081.82 level. The Relative Strength Index (RSI) is deep in the overbought zone and could indicate a bearish pullback. However, the bulls will be eyeing the looming golden cross formation that could lead to an extension of the recent rally.
Resistance levels:
Support levels:
- 2048.79
- 2000.00
- 1987.42
- 1950.00
IG Gold Client Sentiment: Mixed
IGCS shows that retailers are currently net short On gold, with 53% of traders currently holding long positions.
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