Gold (XAU) Daily Forecast: Can Gold Hold Above $2,520 Amid Fed Rate Cut Speculation?

Market Overview

Gold (XAU/USD) climbed to $2,520 per ounce, though it remained shy of its weekly high, as traders maintain caution ahead of the upcoming US Nonfarm Payrolls (NFP) report.

The precious metal’s recent momentum is largely driven by rising expectations of a Federal Reserve (Fed) interest rate cut, which has weakened the US Dollar (USD) for three consecutive days.

The ongoing dollar depreciation is boosting demand for gold, particularly as geopolitical tensions fuel investor appetite for safe-haven assets.

Impact of the Weaker US Dollar on Gold Prices

The US Dollar continues to face selling pressure due to growing speculation that the Fed may implement a significant rate cut in its upcoming September meeting. Economic data released this week has painted a troubling picture for the US economy.

The ADP National Employment Report revealed that the private sector added only 99,000 jobs in August, far below the projected 145,000, signaling a potential slowdown in labor market growth.

Additionally, job openings dropped to 7.673 million in July, marking a three-and-a-half-year low, while the ISM Services PMI showed only a marginal improvement, rising from 51.4 to 51.5. Meanwhile, the Employment Index slipped to 50.2, reinforcing the notion of weakening economic momentum.

Fed Rate Cut Speculation Boosts Safe-Haven Demand

Further fueling gold’s rally is the declining yield on US Treasury bonds, driven by dovish signals from Federal Reserve officials. San Francisco Fed President Mary Daly and Chicago Fed President Austan Goolsbee have hinted that the Fed may need to cut rates to counter falling inflation and a decelerating economy.

Market participants are currently pricing in a 40% probability of a 50-basis-point rate cut during the Fed’s September 17-18 meeting.

As a result, gold remains a preferred investment in the current economic climate, bolstered by a weakening US Dollar, low Treasury yields, and rising demand for safe-haven assets amid uncertainty.

Investors await the NFP report, which could provide further clues regarding the Fed’s next move.

Short-Term Forecast

Gold is likely to remain bullish above $2,520, with immediate resistance at $2,529. However, a break below $2,520 could trigger selling pressure, pushing prices towards $2,500.

Gold Prices Forecast: Technical Analysis

Gold (XAU/USD) trades at $2,521.05, up 0.17% on the 4-hour chart. The price hovers slightly above the pivot point at $2,520.17, a key level to watch today. Immediate resistance lies at $2,528.99, followed by $2,538.65 and $2,549.20.

On the downside, immediate support is seen at $2,500.35, with additional support at $2,486.64 and $2,474.86. The 50-day EMA is $2,503.65, providing additional support, while the 200-day EMA shows a longer-term bullish trend.

As long as Gold holds above $2,520.17, the outlook remains bullish, but a break below this level could trigger a sharp sell-off.