In conjunction with the decline of the US dollar, the XAU/USD (gold) price finds the opportunity to rebound to its highest gains this week. It reached the resistance level of $1675 an ounce, its highest in two weeks, before settling around the level of $1669 an ounce at the time of writing the analysis.
The US dollar fell broadly last Friday and remained under pressure this week, including on Wednesday when a Reuters report indicated that the People's Bank of China (PBoC) became the last to step in to support its currency after the offshore renminbi plunged to a record low.
The renminbi rose more than one percent against the dollar on Wednesday, making it the best performer among the G-20 currencies. This possibly explains the broad declines in US exchange rates that have also been dragged down recently by misplaced speculation about a possible change in the Federal Reserve interest rate policies.
That's after the Wall Street Journal reported last Friday that the Fed may raise interest rates by three-quarters of a percentage point for the fourth time in a row next week. However, it will raise it by half a percentage point less in December to leave the higher end of the fed funds rate range. at 4.5% by the end of the year.
The problems hardly went away before the announcement of the results of US economic data. Inflation, which is still near a 40-year high, is punishing families. Higher interest rates have derailed the housing market and threaten to do even more damage. The outlook for the global economy grows bleaker the longer Russia's war against Ukraine drags on. But for now anyway, the US economy is likely to return to growth after contracting in each of the first two quarters of 2022.
At least that's what economists expect to see on Thursday when the Commerce Department releases its first of three estimates of gross domestic product - the broadest measure of economic output - for the July-September period. Economists polled by data firm FactSet expected, on average, that US gross domestic product grew at a 2% annual rate in the third quarter. This would reverse the annual decline of 1.6% from January to March and 0.6% from April through June.
Consecutive quarters of lower economic output are one unofficial definition of a recession. But most economists say they believe the US economy has so far weathered the recession, pointing to the still-resilient labor market and steady spending by consumers. Concerns are expressed, however, about the possibility of a recession next year as the Federal Reserve continues to steadily raise interest rates to fight inflation.
Gold Forecast
- The XAU/USD gold price is still in a neutral position and the stronger trend is to the upside.
- The bulls will increase the dominance of the trend by moving prices towards the 1675 level and the psychological top of 1700 dollars, respectively. This will support the upward trend for a while.
- On the other hand, breaking the support levels of 1650 and 1638 dollars will end the current bullish expectations for the XAU/USD (gold) price.
I still prefer buying gold from every descending level. The price of gold will be affected today by the level of the US dollar and the extent of investors’ appetite for risk or not. It will also be affected by the reaction from the announcement of the monetary policy decisions of the European Central Bank as well as the announcement of the growth rate of the US economy and the number of US jobless claims.
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