Gold Price Weekly Forecast: Signs of exhaustion in XAU/USD ahead of key macroeconomic events

• Gold struggled to build on recent gains and ended the choppy week little changed.
• The near-term technical outlook suggests that there could be a downward correction before the next leg higher.
• Fed policy meeting and high-tier data releases from the US could impact XAU/USD’s movements next week.

Gold faced rejection near $2,000 but didn’t have a hard time finding a foothold this week. The Federal Reserve’s (Fed) monetary policy meeting and October jobs data from the US could drive XAU/USD’s action next week, with geopolitics moving to the back burner. 

What happened last week?

Gold staged a downward correction to start the week after coming within a touching distance of $2,000 on Friday. News of Israel delaying a ground assault to wait for the arrival of additional American forces to the region and Hamas releasing two Israeli hostages helped the market mood improve early Tuesday and made it difficult for XAU/USD to gather bullish momentum.

Meanwhile, the data from the US showed that economic activity in the private sector continued to expand at a slightly faster pace in early October than in September, with S&P Global Composite PMI rising to 51 from 50.2. The Manufacturing PMI rebounded to 50 from 49.8 in the same period, while the Services PMI rose to 50.9 from 50.1. Commenting on the survey's findings, “hopes of a soft landing for the US economy will be encouraged by the improved situation seen in October," Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said. As the PMI data highlighted the US economy’s resilience, especially when compared to the Eurozone and the UK, the US Dollar (USD) started to outperform its rivals and didn’t allow Gold to turn north.

Although the USD preserved its strength mid-week, XAU/USD managed to regain its traction. The sharp increase seen in XAU/EUR and XAU/GBP pairs showed that Gold was able to capture capital outflows out of the Euro and Pound Sterling. Additionally, re-escalating tensions in the Middle East after Israeli Prime Minister Benjamin Netanyahu said late Wednesday that they ramped up air assaults to pave the way for a ground incursion into the Gaza region allowed the precious metal to continue to benefit from safe-haven demand. 

The US real Gross Domestic Product grew at an annual rate of 4.9% in the third quarter, the US Bureau of Economic Analysis (BEA) reported on Thursday. This reading followed the 2.1% expansion recorded in the second quarter and came in better than the market expectation of 4.2%. Other data from the US showed that Durable Goods Orders increased by 4.7% on a monthly basis in September, while weekly Initial Jobless Claims rose to 210,000 from 200,000. Upbeat data releases from the US supported the USD but XAU/USD continued to stretch higher as the 10-year US yield fell more than 2%.

In the absence of high-impact data releases, Gold went into a consolidation phase on Friday and struggled to make a decisive move in either direction. The BEA announced that inflation, as measured by the change in Personal Consumption Expenditures (PCE) Price Index, held steady at 3.4% on a yearly basis in September. The annual Core PCE Price Index, the Federal Reserve's preferred gauge of inflation, rose 3.7%. Both of these prints matched analysts' estimates. 

Next week?

NBS Manufacturing PMI and Non-Manufacturing PMI from China will be looked upon for fresh impetus in the Asian session Tuesday. Earlier in the month, upbeat growth and Retail Sales data from China provided a boost to Gold and a similar reaction could be seen if PMI surveys show an acceleration in the expansion of the private sector’s economic activity. Ahead of the Fed’s monetary policy decisions on Wednesday, however, the impact of the PMI data on Gold’s valuation could remain short-lived. 

The Fed is widely forecast to leave the policy rate unchanged in the range of 5.25%-5.5%. Despite the impressive Q3 GDP reading, the CME Group FedWatch Tool shows that markets are pricing in a nearly 80% probability that the Fed will opt for a no change in the interest rate in December as well. 

In case the Fed confirms that no additional tightening will be needed this year, the USD could come under renewed bearish pressure and US yields could turn south. In this scenario, XAU/USD could gather bullish momentum. On the other hand, the Fed could leave the door open for one more rate increase in December, citing the strong economy, and force XAU/USD to correct lower. 

On Friday, the US Bureau of Labor Statistics will release the October jobs report. If the Fed adopts a neutral tone and notes that it will assess data before deciding whether the policy is restrictive enough at its current state, there could be a stronger-than-usual reaction to employment data. Another impressive Nonfarm Payrolls (NFP) print at or above 250,000 could cause investors to reassess the rate outlook and attract hawkish Fed bets, triggering a fresh USD rally. A disappointing figure below 150,000 could highlight loosening conditions in the labor market and help XAU/USD hold its ground.

Market participants will continue to pay close attention to headlines surrounding the Israel-Hamas conflict next week. A de-escalation of the crisis could open the door for a deep downward correction for Gold, which has gained more than 8% since Israel declared war on Hamas following the October 7 attack.

Gold technical outlook

Gold edged lower after rising toward $2,000, confirming the importance of this resistance. In the meantime, the Relative Strength Index (RSI) indicator on the daily chart climbed to 70, suggesting that buyers could wait for XAU/USD to make a technical correction before adding to long positions.

On the downside, $1,960 (Fibonacci 23.6% retracement of the long-term uptrend) aligns as first support. A daily close below thist level could attract technical sellers and open the door for another leg lower toward $1,935, where the 200-day Simple Moving Average(SMA) is located, and $1,925 (100-day SMA).

$2,000 (psychological level, static level) is the first important resistance for XAU/USD. Once this level is confirmed as support, $2,020 (static level) and $2,040 (static level) could be set as next bullish targets.

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