Gold Price Forecast: XAU/USD hovers around $1760 amidst a buoyant US dollar

• Gold price stumbles below the $1760 threshold due to overall US dollar strength.
• Fed officials pushed back against a “dovish” stance by the central bank; emphasized the need to get inflation back down “urgently.”
• US labor and housing data were mixed, though mainly ignored by market participants.

Gold price retraces from daily highs reached around $1772, shy of the 50-day EMA, but stumbled below its 20-day EMA, extending its losses for the fourth consecutive trading day. Despite falling US Treasury bond yields, broad US dollar strength, bolstered by hawkish Fed commentary, weighed on the yellow metal prices.

XAU/USD is trading at $1760 a troy ounce, below its opening price, while the US Dollar Index, a gauge of the buck’s value vs. a basket of peers, rises 0.80%, sitting at 107.509. Contrarily, the US 10-year bond yield drops to 2.882% after reaching a high of 2.913%.

Fed speakers underpinned the greenback, to the detriment of gold prices

During the last few hours, Fed officials grabbed attention. Firstly was San Francisco Fed’s Mary Daly, who said that it is too early to declare victory on inflation and said that 50 or 75 bps is reasonable for the September meeting, via CNN.

Later Kansas City Fed President Esther George added that although inflation data was “encouraging” last month, it’s not time for a “victory lap.”  George said that core inflation is “hardly comforting” and noted that the case for raising rates remains strong. At the same time, the St. Louis Fed’s James Bullard commented he’s leaning towards a 75 bps rate hike and foresees an 18-month process of getting inflation back to the Fed’s 2% target.

The last to hit the stand was the Minnesota Fed’s Neil Kashkari. He said that the Fed needs to get inflation down “urgently” while adding that economic fundamentals are strong and emphasized that it does not feel like a recession now.

Elsewhere, before Wall Street opened, US Initial Jobless Claims for the week ending on August 13 decelerated to 250K from 265K foreseen. At the same time, the US housing market is still cooling down due to higher interest rates. Existing Home Sales for July dropped 5.9%, at a rate of 4.8 million units in July, the lowest level since May 2020, when sales hit their lowest point during the Covid-19  lockdowns.

According to sources cited by Reuters, “Assuming the Fed will fight inflation without pushing the economy into recession, safe-haven demand will fade further, causing gold to move gradually lower on a medium to longer-term horizon.”

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