Gold Price Forecast: XAU Climbs 0.5% as U.S. Election Uncertainty and Rate Cuts Fuel Demand

Key Insights:

• Gold prices climbed as uncertainty surrounding the U.S. elections and expectations of rate cuts by major central banks boosted demand.

• Traders are pricing in a 92% chance of a Federal Reserve rate cut next month, enhancing gold’s appeal as a safe-haven asset.

• Geopolitical tensions in the Middle East further support gold’s bullish momentum, with recent Israeli airstrikes raising global concerns.

Gold prices near record highs as focus shifts to U.S. election and Fed rates#gold #finance #invest #Financial #Real #Financial #realme #Ratecuts #Fed #news #rise #media #Todaymood #Dollar pic.twitter.com/hJuvRiJXJW

— David Morris (@brunoelink) October 16, 2024

U.S. Election Drives Safe-Haven Demand for Gold

With the U.S. election looming and expectations of interest rate cuts from central banks growing, gold’s appeal as a safe-haven asset is gaining traction. Investors are also closely monitoring upcoming economic data to assess future price direction.

Republican presidential candidate Donald Trump’s recent defense of his protectionist trade policies has added to the uncertainty.

Markets remain cautious, with the outcome of the election likely to have significant implications for trade, taxes, and monetary policy. As a result, traders are increasingly turning to gold as a hedge against volatility.

Key Economic Data to Watch for Gold’s Next Move

Key U.S. economic data, including retail sales and industrial production figures for September, are set to be released later today. In addition, weekly jobless claims data will provide further insight into the labor market’s recovery.

Analysts from SP Angel noted that if retail sales fall short of expectations, gold prices could experience a further leg up, driven by increased investor demand for safe assets.

Amid rising geopolitical tensions and the upcoming U.S. election, speculative institutional investors such as hedge funds may see gold and Bitcoin as beneficiaries of this trend, but not Ethereum.😅

— Cornelia (@CorneliaJoe5) October 16, 2024

Market sentiment indicates that a 25-basis-point rate cut from the Federal Reserve next month is almost certain, with the CME FedWatch tool showing a 92% probability.

Lower interest rates traditionally support gold prices, as they reduce the opportunity cost of holding non-yielding assets like bullion. With central banks adopting more accommodative policies to stimulate economic growth, the outlook for gold remains bullish in the short term.

• Key Data to Watch:

  • U.S. Retail Sales (September)

  • Industrial Production (September)

  • Weekly Jobless Claims

Technical Outlook for Gold (XAU/USD)

From a technical perspective, Gold (XAU/USD) is showing steady bullish momentum on the 4-hour chart, with the price currently sitting around $2,678. This level has acted as both a pivot point and a short-term support area.

If bulls maintain control, the immediate resistance at $2,685 could be broken, potentially leading to further gains toward $2,698 and $2,709.

On the downside, immediate support lies at $2,667, followed by key levels at $2,653 and $2,642. The 50-day Exponential Moving Average (EMA), currently at $2,651, is providing dynamic support, suggesting the broader uptrend remains intact for now.

The Relative Strength Index (RSI) is at 64, indicating that the market is nearing overbought conditions, though there’s still room for upward movement. As long as the RSI remains below 70, further bullish momentum could continue.

• Key Technical Levels:

  • Immediate Resistance: $2,685

  • Next Resistance: $2,698

  • Immediate Support: $2,667

  • 50-Day EMA: $2,651

  • RSI: 64 (approaching overbought territory)

Geopolitical Tensions and Rate Cuts Add Bullish Momentum

The European Central Bank (ECB) is also expected to lower rates again, citing controlled inflation in the eurozone. Meanwhile, in the UK, British inflation slowed dramatically last month, further reinforcing market bets on a potential rate cut by the Bank of England in the coming weeks.

Such moves by global central banks continue to underpin demand for gold, as lower rates generally weaken currencies and enhance gold’s relative value.

Geopolitical tensions are also adding to gold’s strength. Recent airstrikes by Israel in southern Lebanon, which claimed 16 lives, have exacerbated market concerns and led to an uptick in risk aversion.

Historically, gold has been viewed as a reliable asset during times of geopolitical instability, providing investors with protection against global uncertainties.

With the U.S. election drawing near, economic data on the horizon, and continued geopolitical tensions, the short-term outlook for gold appears solid, with further gains likely if current trends persist.

Investors will continue to watch central bank policies and global events closely as they navigate the uncertain landscape ahead.