- US dollar weakness drives gold’s return, fuelled by expectations of Fed rate cuts.
- Upcoming events, including EU inflation and Powell’s address, impact currencies. Article emphasizes a neutral to bullish gold outlook with potential for highs above $2,020.
Gold reclaimed the US$2,000 threshold yesterday, marking its return to this level for the first time since May, after the US dollar weakened against most major currencies on Monday. The US dollar is now on track for its largest monthly decline in a year, largely because the market is anticipating that the Federal Reserve might initiate interest rate cuts in the first half of next year. Although, it is the opinion of some (including me), that talking about rate cuts at this point is way too soon.
Coming up this week is EU inflation data on Thursday, followed by the US Fed Chair Jerome Powell’s address on Friday.
The former might give us some movement in the EUR/USD, as the data might create more divergence between the ECBs outlooks and the US Feds.
The latter might give us further clues as to the Fed’s timeline in regard to rate cuts, but don’t hold your breath. Bear in mind, a lack of detail concerning this timeline could be just as consequential for the US dollar and gold. For now, in the XAU/USD chart, the Elliott Wave indicator is pointing toward a neutral to bullish outlook, with a couple legs in a cycle left to be completed.
If the cycle plays out, we might like to look at multi month highs above US$2,020, where the price peaked earlier. Pullbacks are forecast just below the $2,000 threshold, so this level will remain of interest for some time.