- The price of gold stabilized ahead of US inflation data due on Tuesday, as central bankers in the US and Europe indicated that more interest rate hikes are on the way.
- In general, the price of XAU/USD gold basically settled between the support level of $1700 an ounce and the level of $1735 in September after several months of declines.
- Bullion prices closed on Friday with their first weekly gain in four weeks. The dollar changed little that day.
Inflation to Slow Down
Economists expect the August inflation figure to slow for the second month in a row, to 8.1%. However, last week US central bank officials seemed to point to another significant rate hike of 75 basis points in September. Fed Governor Christopher Waller said Friday that he favored another "large" increase. According to analysts, support from a weak US dollar and uncertainty stemming from China's fears of the coronavirus and the energy crisis in Europe are being countered by tightening global monetary policy, inflows of ETFs, and concerns about Chinese consumer demand.
The European Central Bank raised interest rates by 75 basis points last week and is ready to do the same when the committee meets in October, people familiar with the discussion said. Overall, investors face a busy week of inflation updates as they continue to keep a close eye on how consumers and businesses deal with the worst inflation in four decades. The main focus is on the Federal Reserve, which has been raising US interest rates in an attempt to tame inflation. Wall Street markets are concerned that the central bank could put too much pressure on the economy and push it into recession.
The concerns have created a volatile market over the past few months. Investors are hoping that any sign of easing inflation may signal the Federal Reserve that it can also dampen higher interest rates. US interest rates have already been raised four times this year and markets are expecting to deliver another massive three-quarter percentage point increase at their meeting next week.
Fed officials, including Chairman Jerome Powell, confirmed the central bank's intention to raise interest rates until inflation is under control.
The most important report on US inflation this week comes Tuesday, and the government is expected to report that price increases slowed in August compared to a year ago, largely due to the continued decline in the cost of gas. The prices of other items, especially food, are likely to continue to rise rapidly. Overall, economists expected US consumer prices to rise 8.1% in August, compared to a year ago, down from 8.5% in July, according to data provider FactSet.
On Wednesday, the government will release its producer price report, giving Wall Street markets a picture of how inflation will affect business in August. Investors will get more details on Thursday about how consumers will react to higher prices when the government releases the US retail sales report for August.
XAU/USD Gold Price Forecast Today:
The XAU/USD gold price is moving in a neutral range and the tendency will be more to the upside if the price moves towards the resistance levels of $1,745 and $1,765 according to the performance on the daily chart. On the other hand, according to the performance in the same time period, the hopes of rising will evaporate if gold prices return to the support levels of 1710 and 1685 dollars, respectively. So far I still prefer buying gold from every bearish level.
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