XAU/USD gold price analysis today: Gold benefits from US dollar weakness

Trading this week was mostly in favor of the bulls, as they moved the gold price XAU/USD higher with strong gains that reached the resistance level of $1,993 per ounce. Meanwhile, the closest point to the psychological peak of $2,000 per ounce, and the highest price for two weeks. Thus, trading this week closed stable around the level of $1,980 per ounce. In general, the gold price XAU/USD benefited from the decline in the US dollar price due to numbers below expectations for US inflation. As, the dollar naturally affected the future of the tightening of the monetary policy of the US Federal Reserve.

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The question is: Will the price of gold decline in the upcoming days?

The answer to this question depends on the performance of the US dollar and the appetite of investors for risk. As, the response to global geopolitical tensions led by the conflict in the oil-rich Middle East. Als, the future of the policies of the world's central banks.

The price of gold XAU/USD may rise to surpass the psychological resistance of $2,000 per ounce again if the US dollar continues to weaken in response to the announcement of the content of the minutes of the last meeting of the US Federal Reserve this week.

On the other hand, US stock indices have rebounded. The most influential factor that pushed US stocks higher last week was the hope that US inflation would ease enough for the Federal Reserve to finally end the rate hikes that are affecting the market. The Federal Reserve had already raised the main interest rate to its highest level since 2001, in an attempt to slow the economy and weaken financial markets enough to control inflation without causing a painful recession.

Last week, a report showed that US consumer inflation had slowed more than expected last month, raising hopes that the Federal Reserve could strike a delicate balance. Furthermore, subsequent readings bolstered hopes after signaling that inflation and the overall economy may be slowing down.

Now, traders are trying to bet on when the Federal Reserve can actually start cutting US interest rates, which could boost investment prices and provide oxygen to the financial system. The Federal Reserve has said it plans to keep US interest rates high for a while to ensure a final victory in the fight against inflation, but traders believe cuts could begin as early as summer 2024. Nearby, one potential source of concern about inflation has retreated in recent weeks. Oil prices have fallen amid concerns about a mismatch between the abundance of crude supply and weak demand.

In the bond market, the yield on 10-year Treasury notes fell to 4.43% from 4.44% late Thursday. Just a few weeks ago, the inflation rate was above 5%, its highest level since 2007, which led to a decline in stock prices and other investments. Of course, a sharp enough decline in Treasury yields and a large enough rise in stock prices could ultimately conspire to work against Wall Street markets. For his part, Federal Reserve Chairman Jerome Powell said after the Fed's last meeting on interest rates that he might not raise rates further if the summer jump in Treasury yields and the decline in stock prices remained “persistent.” This is because such pressures can act as substitutes for further rate hikes on their own.

Gold price forecast for XAU/USD today:

According to the performance on the daily chart below, the price of gold XAU/USD is still on an upward trend and the bulls will strongly control the direction. Therefore, if it moves towards the psychological resistance level of $2,000 per ounce, which is the closest to it now. Meanwhile, moving towards it and above could move the technical indicators towards overbought levels, but this could be ignored if the current factors driving gold gains continue. On the other hand, and at the same time period, the price of gold XAU/USD may abandon its current upward path. Shortly, if prices return to the support levels of 1960, 1952, and 1940 USD, respectively. In general, we still prefer to buy gold from every downward level.

XAU/USD (Daily Chart)

Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.