To make a XAUUSD prediction next week, we need to understand what happened in the past. After ending the previous week in a bull run, GOLD kept a strong bullish momentum reaching a new higher high of $2,483.74 on Wednesday. However, this momentum reverted to a bearish rally in the second half of the week. With the Federal Reserve’s black out period, market participants will pay close attention to GDP and PCE from the US next week.
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XAUUSD Prediction Next Week: Bearish Rally on Friday
Gold fell due to disappointing data from China, which showed GDP growth at 4.7% in Q2, falling short of market expectations. Retail sales keep growing in June and July, according to analysts. Fed Chairman Jerome Powell confirmed further progress in Q3, and the US Dollar struggled to find demand, allowing XAU/USD to end the day marginally higher.
XAUUSD New High-Record: an Unexpected Event ?
Gold experienced a boost on Wednesday ($2,873.84) due to a sharp decline in US Treasury bond yields, which reached its weakest level since March. The USD drop was likely due to the September Fed rate cut. On Thursday, XAU/USD entered into a bearish rally, while the USD captured capital outflows from the Euro. Gold fell to the $2,400 zone and turned negative for the week.
XAUUSD Investors Turn Attention to US Economic Indicators
The Purchasing Managers Index (PMI) data for July is expected to reveal a healthy private sector expansion. It will cause bearish pressure on the USD if the PMI falls below 50. However, The US Bureau of Economic Analysis released its GDP growth estimate, with markets expecting a 2% annual rate of expansion. A 2% growth could lift the USD and cause Gold to stretch lower, potentially reducing the probability of a bearish momentum.
XAUUSD Technical Analysis Prediction: What we Need to Know
Gold’s Relative Strength Index dropped below 60, indicating a loss of bullish momentum. Key support is at $2,400, where Fibonacci’s 38.2% retracement meets a psychological level. Technical traders may use this as resistance, potentially leading to further lowers.
Why is Inflation Returning?
First of all, Inflation measures the increase in goods and services prices. Right now, Inflation is resurging due to factors like increased central bank money supply, supply chain disruptions, rising consumer demand, wages, energy prices, government spending, and currency depreciation.
The Impact of Inflation in The Forex Market
Inflation can impact families by reducing their purchasing power. This, in turn, affects their standard of living and impacts fixed incomes. Families with savings accounts or investments may see their value decrease due to rising prices. Central banks use interest rates to control inflation. When inflation is low, we see foreign investors buying the “stable currency.” On the contrary, high inflation often leads to weaker currencies.
Why We Need to Know CPI and PCE?
The Consumer Price Index (CPI) and Personal Consumption Expenditure (PCE) Price Index, track inflation. With CPI reporting slightly higher rates and PCE reporting lower rates. Central banks use these indices to monitor interest rates and currency strength. A rise in CPI will affect the currency strength.
Why is XAUUSD so Important During This High Inflation Period?
Gold is often preferred by investors during high inflation due to its safe-haven properties. However, higher interest rates increase the cost of holding Gold. Lower inflation brings down interest rates, making Gold a more viable investment option.
In Conclusion: Brace Yourself for Next Week’s Shocking Developments
We have very contrasting information to consider. From a fundamental analysis perspective, the GDP report, including the PCE price index report, should not be very surprising. Economists are predicting strong GDP growth, and the PCE will probably show increased inflation, which, in turn, will increase interest rates, potentially indicating an increase in gold. From a technical analysis perspective, we may see a new low very soon.
