Gold Prices Forecast: XAU/USD Jumps Resistance as Traders Eye Fed Minutes
LONDON (July 3) Gold is trading higher on Wednesday, crossing above the 50-day moving average that previously acted as resistance. Traders are closely watching for the release of Federal Reserve meeting minutes, seeking insights into potential interest rate cuts.
At 10:29 GMT, XAU/USD is trading $2346.43, up $16.95 or +0.73%.
Federal Reserve’s Inflation Stance
Fed Chair Jerome Powell stated on Tuesday that the U.S. is returning to a “disinflationary path.” However, he emphasized the need for more data to confirm recent weaker inflation readings before considering rate cuts. Powell noted, “We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.”
This cautious approach has kept gold prices in a narrow range for several weeks. The precious metal’s sensitivity to interest rate expectations makes the Fed’s stance particularly significant for traders.
Economic Indicators in Focus
Key economic data releases are on traders’ radar. The ADP employment report and weekly jobless claims are due later today, while the crucial nonfarm payrolls report is scheduled for Friday. These figures could significantly impact rate cut expectations and, consequently, gold prices.
The Job Openings and Labor Turnover Survey (JOLTS) report released on Tuesday showed an increase of 221,000 job openings to 8.140 million in May, surpassing economists’ forecasts of 7.910 million. However, April’s data was revised lower to 7.919 million from the previously reported 8.059 million.
Market Sentiment and Positioning
According to the CME FedWatch Tool, traders currently see a 67% chance of a Fed rate cut in September, up from about 63% on Monday. This shift in expectations reflects the market’s interpretation of recent economic data and Fed communications.
Lower interest rates typically support gold prices by reducing the opportunity cost of holding the non-yielding asset. The World Gold Council’s mid-year outlook report suggests a “clear path for gold to outperform,” likely fueled by Western investment flows.
Dollar and Yield Movements
The dollar index slipped 0.1% to 105.71 in Wednesday’s trading, influenced by Powell’s moderately dovish tone. U.S. Treasury yields have held steady as investors digest recent economic data and Fed comments.
Erik Bregar, director of FX & precious metals risk management at Silver Gold Bull, noted, “Powell didn’t really say anything new, but I would say he was slightly dovish,” adding that his remarks helped push the dollar slightly lower.
Market Outlook
The short-term outlook for gold remains tied to upcoming economic data and Fed policy expectations. In other words, we’re in a news-driven market. The nonfarm payrolls report on Friday could potentially “shake things up” for the gold market if it leads to a shift in rate-cut expectations.
Traders should monitor central bank demand, interest rate developments, and Asian investor sentiment, as significant changes in these factors could influence gold’s performance in the second half of the year.
Daily Gold (XAU/USD)
XAU/USD is edging higher on Wednesday after crossing to the strong side of the elusive 50-day moving after at $2338.44. The move indicates the presence of buyers. However, we can’t be sure until support is established at this level and traders start taking out previous tops. Until then, we can also build a case for this being short-covering. Nonetheless, it’s probably the best indicator of short-term direction.
FXEmpire
