Gold (XAU) Daily Forecast Amid Weak USD and China's Stimulus Effects

Market Overview

Gold prices (XAU/USD) are facing downward pressure, hovering around $2,656.10 after reaching an intraday low of $2,647. Despite favorable conditions such as a weaker U.S. dollar and dovish expectations from the Federal Reserve, the precious metal struggles to attract bullish interest due to a risk-on sentiment globally.

China’s Economic Measures Dampen Gold’s Appeal

The recent uptick in market sentiment followed China’s announcement to cut mortgage rates for existing home loans by October's end, alongside a substantial stimulus package, its largest since the pandemic. The People’s Bank of China’s actions boosted investor confidence, leading to reduced demand for safe-haven assets like gold.

Despite this, Chinese economic data remains mixed. The official Manufacturing PMI for September rose to 49.8 from 49.1 in August, signaling contraction. Meanwhile, the Caixin Manufacturing PMI dropped to 49.3, and the Non-Manufacturing PMI fell slightly to 50.0. This uneven recovery limits the impact of China’s measures on broader market sentiment, keeping gold’s trajectory uncertain.

Geopolitical Risks Support Safe-Haven Demand

Rising geopolitical tensions in the Middle East counterbalance positive economic sentiment. Escalations between Israel and Iran-backed groups like Hezbollah fuel demand for protective assets. Over the weekend, Israeli airstrikes targeted various locations in Yemen and Lebanon, raising concerns about potential supply chain disruptions impacting global markets.

“Gold remains caught between risk-on sentiment driven by China’s stimulus and safe-haven demand from escalating geopolitical tensions,” noted Priyanka Sachdeva, Senior Market Analyst at Phillip Nova.

Dovish Fed and Weak U.S. Dollar Offer Support

In the U.S., dovish Federal Reserve expectations have kept the dollar near its lowest level since July 2023. Market forecasts suggest a potential 50 basis points cut in November. A weaker dollar generally supports gold prices, making the metal more affordable for foreign buyers.

Overall, conflicting signals from global markets and geopolitical risks create a mixed outlook for gold, with prices struggling to find a clear direction.

Short-Term Forecast

Gold will likely remain under pressure, with key support at $2,647. A break below this level could trigger further declines, while resistance at $2,665 must be breached for a bullish reversal.

Gold Prices Forecast: Technical Analysis

Gold (XAU/USD) trades at $2,656.10, down 0.09%, indicating mild bearish sentiment. The price is below the pivot point of $2,659.52 and the 50-day EMA at $2,659.49, suggesting further downside potential. Immediate support is $2,647.30, followed by $2,640.15 and $2,630.95. A breakdown below these levels could test its 200-day EMA at $2,628.98. On the upside, gold needs to clear $2,665.87 to target higher resistances at $2,674.13 and $2,683.18. A break above $2,660 could trigger a bullish shift, but until then, the downward channel remains in play.