Looking ahead, traders will be keeping an eye on the upcoming Empire State Manufacturing Index from the US, which could offer some short-term trading opportunities.
The forecast comes ahead of a speech from Fed Chairman Jerome Powell scheduled for later in the North American session, which is expected to provide further insight into the Fed’s monetary policy stance.
How a stronger US dollar could impact gold prices amid hopes of a Federal Reserve rate cut
The US dollar rose despite widespread expectations that the US Federal Reserve will begin cutting interest rates in September and will likely cut them further in December. Current market prices suggest that the probability of a rate cut in September is over 90% following the weak US Consumer Price Index released last Thursday.
Additionally, the U.S. Bureau of Labor Statistics reported Friday that the Producer Price Index (PPI) for final demand rose 2.6% in June, beating expectations of 2.3%.
Despite expected Fed rate cuts and rising inflation, a stronger US dollar could limit gold price gains as investors balance economic stability with potential interest rate adjustments.
China’s economy is expected to grow 4.7% in the second quarter of 2024, down from 5.3% in the first quarter. Retail sales grew 2.0% year-on-year in June, below the 3.1% forecast. Additionally, fixed asset investment grew 3.9% year-to-date as of June, below the 4.0% forecast.
Therefore, political tensions in the US and economic challenges in China, including slowing growth in the second quarter and weak retail sales and investment data, are likely to support higher gold prices as demand for it as a safe haven amid uncertainty grows.
Short-term forecasting
Gold prices are facing potential volatility as they are above the pivot point at $2,405. A surge above $2,405 could lead to a rally to $2,425, but failure to sustain could trigger a sell-off towards $2,378.
