This week is pivotal for gold, indices and FX, with market-moving data releases, central bank meetings, and major company earnings reports to come. For gold, the focus will be on the FOMC rate announcement on Wednesday and the July jobs report on Friday. Anticipated downside risks for the dollar could benefit gold prices. Meanwhile, the technical path of least resistance remains to the upside for the precious metal, making it an ideal long candidate from a trading point of view.

FOMC Meeting: Preparing for a September Rate Cut

The Fed may take a more dovish stance at this week’s meeting, reflecting recent comments by FOMC officials and weak US economic data. The slow disinflation process and rising unemployment rate, now at 4.1%, suggest that the current policy might be excessively restrictive. With the global trend towards policy loosening, the Fed could seek to avoid unnecessary economic strain, especially given its previous mismanagement of inflation and interest rates.

Market expectations already indicate a September rate cut, with around 68 basis points worth of cuts priced in by year-end. If the Fed adopts a dovish tone, predictions could increase to potentially three cuts before the year ends.

Additional Risk Factors: BOJ and US Jobs Report

The upcoming US jobs report and a potential surprise rate hike by the Bank of Japan could further pressure the dollar. The yen has strengthened recently due to the narrowing yield spreads between Japanese bonds and those of other countries. As the Fed considers rate cuts, the Bank of Japan has only begun tightening its monetary policy, with speculation of a possible rate increase in the upcoming BOJ meeting.

Meanwhile, economists expect around 177,000 net US non-farm job gains for July. The unemployment rate has been rising, and the pace of job gains has slowed, reinforcing expectations of a September rate cut, which could weaken the dollar and support gold prices.

Technical Analysis and Trade Ideas for Gold

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From a technical perspective, the XAUUSD forecast remains bullish despite recent volatility. The precious metal has maintained its series of higher highs and higher lows over several months, although it has struggled to sustain recent breakout attempts. Short-term support at approximately $2,360 was tested on Friday, with the metal forming an inside bar formation on the daily chart. Maintaining this level is crucial to prevent a deeper correction. This support level converges with a bullish trend line dating back to February. The next key support is around $2,295, a level that has provided a floor for gold on multiple occasions since April.

For resistance levels, the first significant one is around $2,400. Beyond this, a resistance band exists between $2,430 and $2,450, where gold formed interim highs in April and May. Breaking above $2,450 could lead to a continuation towards $2,500, the next psychologically significant level, given the absence of prior reference points above July’s all-time high of $2,483. 

In a nutshell

The current week presents a crucial juncture for gold, influenced by central bank decisions and key economic data. The technical and fundamental outlook remains bullish, with potential for significant price movements based on upcoming events. Traders should closely monitor support and resistance levels, as well as market reactions to the FOMC meeting and US jobs report, for strategic trading opportunities. I reckon the bulls are still in control and therefore expect higher gold prices come the end of the week.

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