Gold Price Forecast: XAU/USD advances towards $1,920, focus on US economic data

• The price of Gold strengthens after positive data from China and new fiscal stimuli in the country.
• The US Dollar Index DXY has retreated from its six-month high, providing support for the price of the yellow metal.
• Rising US bond yields could offer support to limit the Dollar correction.

The price of Gold (XAU/USD) extends its gains for the second consecutive day, trading higher near $1,920 per troy ounce during the European session on Friday. XAU/USD is receiving bullish support, likely attributed to a slight correction in the US Dollar (USD).

Furthermore, positive data released by China’s National Bureau of Statistics (NBS) reveals encouraging economic trends. The optimism of the markets could serve as support to support Gold prices, together with the recent measure by the People’s Bank of China (PBoC) to lower the required reserve ratio (RRR) by 25 basis points (bp).

China’s retail sales grew 4.6% year-on-year, beating expectations for a 3.0% increase in August and demonstrating an improvement from the previous month’s 2.5% figure. In addition, industrial production exceeded estimates by registering a growth rate of 4.5% in August, compared to 3.7% in July.

The DXY Dollar Index has retreated from its recent six-month high, trading lower around 105.20. However, the likelihood of a substantial corrective decline in the Dollar appears restricted, largely due to market participants’ caution in response to the US Federal Reserve’s (Fed) hawkish stance on the monetary politics.

Elsewhere, US Treasury yields recovered intraday losses, with the US 10-year bond yield at 4.30% at the time of writing. Improving yields could support the dollar.

Anticipation of the Fed’s dedication to tighter monetary policy, which could involve additional interest rate hikes or tightening measures, is expected to deter traders from taking bold positions in non-yielding assets like the yellow metal. Monetary policy decisions and communications from the Fed will continue to be the focus of the Dollar’s movements in the short term.

Furthermore, the latest economic data from the United States has been generally positive. Initial jobless claims for the week ending September 8 were better than expected, with 220,000 new claimants. We report a slight improvement from the previous week’s figure of 217,000.

The core Producer Price Index (PPI) for August was in line with expectations with a 2.2% increase, although it was slightly lower than the previous rate of a 2.4% increase. Retail sales also showed improvement, rising 0.6% from 0.5% the previous month, beating market expectations that had forecast a slowdown to 0.2%.

Taken together, this data suggests a relatively healthy economic environment in the US, which may impact market sentiment and influence trading decisions.

Market participants will closely monitor the release of the preliminary US Michigan Consumer Sentiment Index during the American session. Consensus expectations point to a slight decline in the reading from 69.5 to 69.1.