Gold Outlook: Rising Interest Rates Weigh on XAU/USD

by Trading2Day
gold outlook

Did you know XAU/USD is now at $2307.28, lower by $12.32 or -0.53%, due to rising interest rates1?

The dollar recently got 0.2% stronger. This makes gold costlier for those with other currencies. It pushes gold prices down1.

Investors are keen on new economic data and possible interest rate changes. These factors are key now, affecting gold’s future prices1.

Fed officials are being careful about making rate cuts. They want to see long-term lower inflation. This action is needed to hit the 2% inflation target1.

Gold’s short-term future doesn’t look good. Current economic signs and what the Fed is saying make gold less attractive. Plus, holding gold doesn’t earn interest. The Fed’s cautious view on rate cuts also influences this1.

Traders are watching closely as interest rates go up. When rates increase, people might take money out of gold1.

Given these changes, understanding what’s affecting gold prices is vital. It helps predict how the gold market will look2.

Factors Affecting Gold Prices

Many things can change the price of gold. This includes how much gold people want, the world’s economic health, and how much gold central banks keep.

Gold Demand-Supply Dynamics

The price of gold goes up or down based on if people want more or less. When people buy more gold jewelry, prices can go up. The same happens when companies need more gold.

On the flip side, if fewer people buy gold jewelry, prices might drop. This is because there’s less demand.

Global Economic Factors Impacting Gold

World events and the economy also play a big role in the gold market. Things like trade problems, how much things cost, and if economies grow or not matter a lot.

When the economy is shaky or there are big problems, many people buy gold. They see it as a safe place for their money. This makes the demand and prices go up.

On the other hand, when the economy is doing well, people might not buy as much gold. This can make the prices go down.

Central Bank Gold Reserves

What central banks do with their gold can also change its price. Central banks around the world keep a lot of gold. This gold is part of a country’s financial safety net.

If central banks buy more gold, prices might go up. This shows they think gold is a good investment. But, if they sell their gold, prices could go down.

To really get gold prices, you have to look at all these things. By understanding them, people can predict how gold prices will move.

Statistical Data Reference
Precious metals price index climbed 9 percent in April 2024 (m/m) 3
Gold prices reached an all-time nominal high of $2,331 per troy ounce in April 3
Silver prices surged by 12 percent in April 2024 (m/m) 3
Platinum prices rebounded in April 2024, rising by 3.5 percent 3
Gold prices are expected to be 8 percent higher in 2024 compared to 2023 3
Silver prices are expected to increase 7 percent this year compared to 2023, with an additional 4 percent uptick forecasted for 2025 3
Platinum prices are expected to increase by 4 percent in 2024, with a further 5 percent increase anticipated in 2025 3
Gold price reached an all-time high of $2,125.89 in December, surpassed by a trading value of $2,160 per troy ounce, and most recently hit $2,170.16 on March 22 4
Federal Reserve’s Open Market Committee (FOMC) meeting suggested interest rate cuts three times in 2024, with expectations of gold prices moving within a range of $2,140 to $2,200 leading up to the April meeting 4
Technical analysis indicates a potential rise in gold price to $2,300 to $2,400 within a one to two year period 4
Experts expect a pullback in gold price to be no more than 3% to 5% if it occurs, considering previous resistance levels to become new support levels 4
Financial experts suggest allocating no more than 10% of assets to gold in a diversified portfolio strategy to hedge against inflation and diversify investments 4
Gold prices have risen approximately 20% over the past six months to more than $2,000 per ounce 5
The U.S. Dollar Index (DXY) is down 1.3% year-to-date, while the price of gold is up more than 10% 5
Global gold demand increased 18% in 2022 to 4,741 tons 5
Gold generated an average annual return of 7.7% between 1971 and 2022 5
The S&P 500 produced an average annual return of 10.2% since 1971 5
Gold prices ticked slightly higher by 0.4% in 2022 while the S&P 500 dropped 19.4% 5
CMC Markets forecast gold prices to reach between $2,500 and $2,600 per troy ounce 5
Randy Smallwood, CEO of Wheaton Precious Metals, predicted gold prices to hit $2,500 per ounce 5
Swiss Asia Capital’s Juerg Kiener said that mild global recessions in 2023 could send gold’s price as high as $4,000 an ounce 5
Bank of America forecasts an annual average gold price of $2,009/oz for 2023, with a prediction that gold may reach $2,200 per ounce in the fourth quarter 5

Technical Analysis and Price Levels

Technical analysis is vital for knowing gold’s short-term price shifts. Traders watch support and resistance levels to spot good times to buy or sell. Indicators like moving averages help understand gold’s momentum and trend.

Gold prices have been less volatile in the last two weeks. The market might stay steady until it hits $2,355 or drops below $2,280. If gold goes above $2,415, it might keep rising. But a drop under $2,260 could signal a fall.

The EUR/USD faced a challenge near 1.0790 on moving averages. It might drop to 1.0750 and lower if it can’t stay above. Reaching 1.0865 could happen if it goes beyond 1.07906.

GBP/USD recently neared 1.2500 but fell by Tuesday. Breaking below 1.2500 may push the price down to 1.2430 and possibly 1.2300. Rising past 1.2600 might push it higher, aiming for 1.27206.

Analysts expect gold to trade between $2,421.00 and $2,651.00 in 20247. But, more cautious estimates see it between $2,000.00 and $2,133.007. Yet, some believe it could go as high as $2,750.23 to $2,810.767.

Since January 2024, gold has increased over 23% up to $2,450.007. The US interest rate hit 5.5% last July, the highest in two decades7. Inflation reached 3.5% by June, dropping slightly in May7. The Federal Reserve has kept interest rates stable since early May7.

Since April, gold’s price has steadied, showing bullish signs. It should keep a positive tactical stance. Important support levels are at $2,222, $2,300, and $2,1468.

Silver is also looking promising, aiming to go above $30. It has strong support at $28.708.

Both gold and silver are expected to do well. Gold could surpass $2,450, and silver might reach $358. Market analyst Fawad Razaqzada is optimistic about their future8.

Technical Analysis and Price Levels

Market Volatility and Economic Events

Market ups and downs really affect gold prices. Big economic signs, like inflation numbers and jobless claims, play a big role. They change how folks feel about the market, which can make gold prices go up or down9. Things like debates and elections can make the gold market more uncertain. Many folks turn to gold when things look iffy because it feels safer. Also, what’s happening in gold mining, like new mines or how much gold they get, affects the market too9.

Gold’s price is now above £1,600 for each troy ounce. This is the highest it’s ever been, thanks to worldwide tension and growing prices. Over the last 100 years, gold’s return each year was 2.1%, lower than the Dow Jones. But even then, gold did better than the DJIA in 43% of the years until 20159. In hard times, like recessions, gold can do much better than stocks. And even in normal times, about 26 out of 65 years, gold did way better than the stock market9.

Gold is key for making investment mixes strong and safe. It’s good at protecting money when the economy is shaky. Some countries want to link their money back to gold for more financial safety. Reintroducing the gold standard is an idea that’s getting some support. But history shows that even back then, governments worked to control gold’s value. This made the gold standard not as stable as people thought9.

Moreover, people always want gold because it stays valuable, fights inflation, and makes mixed investments better. When the world’s problems grow, so does the need for gold. In April, gold prices hit new highs, showing more people wanted this safe thing. As the gold world reacts to today’s money issues and ups and downs, investors need to keep an eye on gold’s trends and where the mining industry is going9.

Source Links

  1. Gold Prices Forecast: Fed’s Hawkish Tone Pressures XAU/USD –
  2. Gold Price Forecast: XAU/USD battles to retain the $2,300 mark –
  3. Gold shines amid geopolitical uncertainties –
  4. How high will the price of gold go? Here’s what some experts think –
  5. Why Is The Price Of Gold Rising? –
  6. Gold Price, EUR/USD, GBP/USD – Market Outlook and Technical Analysis –
  7. Gold Price Forecast for 2024 and Next 5 Years: Predictions for 2024-2025, 2030 | LiteFinance –
  8. Gold and silver forecast: Metals continue bullish consolidation – Technical Tuesday –
  9. Is gold a safe haven for investors? – Economics Observatory –

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