Market Overview

The U.S. Dollar Index (DXY) pulled back from a seven-week high, giving some temporary relief to gold prices. However, the dollar’s retreat has not been sufficient to drive a rebound in the metal as traders eye upcoming economic reports and Federal Reserve communications.

U.S. Dollar Dynamics and Federal Reserve Policy Outlook

The greenback has softened slightly as traders reassess the Fed’s rate trajectory ahead of the Federal Open Market Committee (FOMC) meeting minutes release on Wednesday, followed by key inflation data from the Consumer Price Index (CPI) and Producer Price Index (PPI) later this week.

According to the CME Group’s FedWatch Tool, market participants currently see an 85% chance of a 25 basis point rate cut at the next FOMC meeting, a scenario that continues to create uncertainty for gold’s outlook.

Last week’s strong U.S. non-farm payroll report, which showed 336,000 jobs added in September, highlighted the labor market’s resilience.

Minneapolis Fed President Neel Kashkari noted that while inflation risks are easing, the potential for rising unemployment could reshape the central bank’s policy approach.

St. Louis Fed President Alberto Musalem echoed this cautious sentiment, suggesting that “further gradual reductions in the policy rate will likely be appropriate over time,” indicating that the Fed is closely monitoring economic conditions before committing to any aggressive policy shifts.

Gold Price Outlook: Mixed Factors Influence Market Sentiment

Meanwhile, the yield on the benchmark 10-year Treasury bond surged past 4%, its highest level in over two months, further pressuring non-yielding assets like gold. Rising bond yields, coupled with diminished expectations for deep rate cuts, have dulled the appeal of gold as an investment.

On the geopolitical front, Middle East tensions are providing a floor for gold prices as investors seek safe-haven assets amid heightened uncertainty.

Additionally, concerns over China’s economic slowdown add to global economic worries, which may help support gold prices in the near term despite a generally bearish outlook.

Short-Term Forecast

Gold Prices Forecast: Technical Analysis

Gold – ChartGold (XAU/USD) is hovering around $2,642.93, up slightly by 0.01%. The yellow metal trades above the key pivot point of $2,634.03, indicating underlying bullish sentiment. Immediate resistance is seen at $2,645.85, while a break above this could push prices to test the next levels at $2,652.24 and $2,659.48.

On the downside, immediate support stands at $2,626.68, and a break below this level could lead to a retest of $2,620.72 or even $2,615.51.

Overall, gold’s current position above the 50-day EMA at $2,648.99 and the upward trendline near $2,634 suggest a buying trend. However, traders should monitor for any sharp moves below $2,634, which might trigger a bearish shift.