Gold (XAU) Daily Forecast: Geopolitical Risks Boost Gold, But Strong USD Limits Gains

Market Overview

During Wednesday’s Asian session, gold (XAU/USD) witnessed a modest decline, giving back some of the previous day’s gains. The initial surge was driven by heightened geopolitical tensions in the Middle East following Iran’s ballistic missile strike.

As a traditional safe-haven asset, gold often benefits from geopolitical instability. However, its bullish momentum was hampered by a strengthening US Dollar (USD) and tempered expectations for aggressive rate cuts by the Federal Reserve.

On the data front, the USD remained strong due to a resilient US labor market, with the Job Openings and Labor Turnover Survey (JOLTS) showing an unexpected rise in job openings to 8.04 million in August.

This strength in the dollar has placed further pressure on gold prices, as a stronger dollar makes gold more expensive for foreign investors.

Geopolitical Tensions Boost Gold Demand, but Gains Remain Capped

Gold’s brief rally was fueled by growing fears of a wider conflict in the Middle East. The situation escalated after Iran’s missile strike on Israel, which Iran claimed was a response to Israel’s actions against Hezbollah in Lebanon.

Israeli Prime Minister Benjamin Netanyahu warned of potential retaliation, while Iran cautioned against further escalation, heightening the risk of broader regional instability.

However, despite the initial upward movement, gold prices have struggled to break through higher resistance levels due to the stronger USD and the expectation of a less aggressive Fed policy stance.

This geopolitical risk will likely keep gold supported in the short term, but the gains remain limited by ongoing dollar strength.

US Labor Market Resilience and Fed Speculation Limit Gold’s Upside Potential

On the US economic front, data showed that job openings surged unexpectedly, reinforcing confidence in the labor market. Meanwhile, the Institute for Supply Management (ISM) reported a steady Manufacturing PMI at 47.2, indicating persistent business contraction.

With speculation about the size of the Fed’s next rate cut ongoing, gold traders are closely watching the upcoming US ADP private-sector employment report and Nonfarm Payrolls data for further direction.

According to the CME Group’s FedWatch Tool, there’s a 35% chance of a larger 50 basis point rate cut in November. Overall, the combination of a stronger USD and limited expectations for aggressive Fed easing has capped gold’s gains. At the same time, geopolitical risks add an element of uncertainty that could lead to increased market volatility in the near term.

Short-Term Forecast

Gold’s recent decline during Wednesday’s Asian session indicates continued pressure below $2,654.56. A break below $2,648.91 could signal further losses, while sustained support above $2,661.66 is needed for a bullish reversal.

Gold Prices Forecast: Technical Analysis

Gold (XAU/USD) is trading at $2,655.14, down 0.32% in today’s session. The precious metal has struggled to hold above its key pivot point at $2,654.56, signalling potential downward pressure.

If the price remains below this level, gold could test immediate support at $2,648.91, with further declines toward $2,643.26 and $2,634.93. However, a rebound above $2,661.66 would suggest renewed buying interest, potentially targeting resistance levels at $2,667.72 and $2,673.17.

Technical indicators are mixed. The 50-day EMA at $2,653.19 provides immediate support, while the 200-day EMA at $2,636.13 suggests a longer-term bullish bias. A decisive move above $2,650 is crucial to sustain bullish momentum, while a break below could trigger more selling pressure.