Gold price forecast: XAU/USD hits multi-week high on USD weakening

On Monday, gold recovered some of its early losses and went positive for the fourth day in a row. During the first part of Monday’s European session, the momentum drove the gold price to a new three-and-a-half-week high, circling around $1,772-$1,773. The post-FOMC selling bias in the US dollar has not faded on the first trading day of the new week, which is turning out to be a significant element that is to the advantage of the commodity priced in dollars.

The Federal Reserve sounded less hawkish last week and signaled that it might moderate the pace of the policy tightening campaign at some time in the future in response to evidence of a downturn in the economy. In addition, the dismal publication of the Advance US Q2 GDP data confirmed a technical recession. It encouraged predictions that the Fed would not boost interest rates as rapidly as prior forecasts indicated. Because of this, the US Dollar is subjected to some follow-through negative pressure for the fourth day in a row.

In addition to the consistent selling of USD, the prevailing cautious attitude surrounding the equities markets further supports the safe-haven commodity of gold. The recent upbeat surge in the markets seems to be losing momentum as concerns about a worldwide economic slowdown intensify. Following the dismal announcement of the official Chinese Manufacturing PMI for July, which fell back into the contraction zone, the fears have again come to the surface. This results in investors’ desire for perceived riskier assets being muted.


However, it is yet unknown if bulls will be able to capitalize on the rise or choose to take some winnings off the table. The potential for a goodish return in the rates on US Treasury bonds might limit losses for the USD and contain gains for the non-yielding gold. A possible course of action for investors is to hold off on making risky bets in the run-up to this week’s crucial central bank event risks. Tuesday is the day that the Reserve Bank of Australia (RBA) is expected to reveal its policy decision, and Thursday is when the Bank of England is due to convene.

In addition, important US macro data planned to be released at the beginning of each new month will also play a vital role in defining the next leg of a directional move for gold. The publication of the ISM Manufacturing PMI on Monday sets off a week that will be rather eventful for the economy of the United States. This, in conjunction with the rates on US bonds, will affect the USD and offer some impetus to spot prices. The monthly employment report (NFP) released in the United States on Friday will continue to be the primary focus.