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Gold (XAU) Forecast: Consolidates Near $2,365, What’s Next?

June 21, 2024

LONDON (June 21) Gold (XAU/USD) is trading within a range during the early European session on Friday, consolidating around $2,360-$2,365. This follows a strong upward movement to a two-week high. US Treasury bond yields are building on Thursday’s rise in anticipation of new supply next week, creating a headwind for gold.

However, softer US economic data on Thursday has reinforced expectations for the Federal Reserve to start cutting rates later this year, weakening the US Dollar and supporting gold prices.

The Bank of England’s dovish stance on Thursday has increased the likelihood of an interest rate cut in August. Similarly, the European Central Bank’s decision earlier this month to lower borrowing costs and the Swiss National Bank’s second rate cut of 2024 on Thursday have bolstered bullish sentiment for gold.

Disappointing US Economic Data

Disappointing US economic data released on Thursday further strengthened market expectations for an imminent Federal Reserve easing program, boosting gold to a two-week high. The US Department of Labor reported 238,000 unemployment insurance claims for the week ending June 15, higher than the expected 235,000.

Additionally, Housing Starts fell 5.2% to an annual rate of 982,000 units in May, and Building Permits dropped 2.9% to 949,000 units. The Philadelphia Fed Manufacturing Index declined to 1.3 in June from 4.5, although it remained positive for the fifth consecutive month.

Upcoming Economic Indicators

Despite the hawkish outlook from Fed policymakers, the market is anticipating another rate cut at the December policy meeting. Minneapolis Fed President Neel Kashkari indicated that the US economy’s resilience might delay achieving the 2% inflation target by a year or two.

Richmond Fed President Tom Barkin emphasized the need for a data-dependent approach. Rising US Treasury yields in anticipation of new supply next week are capping gains for gold.

Investors are now looking ahead to the release of flash PMI data and US Existing Home Sales figures for further market direction.

Short-term Forecast

Gold (XAU/USD) is expected to trade within the $2,360-$2,365 range, influenced by US economic data and global central bank policies. Maintaining above $2,356 supports bullish momentum; a break below could trigger selling pressure.


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