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  • Key break here in the 10-year #Treasury yield as it rises to the highest since late June Took out 1.4230 resistance, and the 100-day SMA Eyes now on the 38.2% Fib extension at 1.4775 Also potential falling resistance from March
  • The move in rates after this week’s FOMC has continued and the 10 year yield has pushed up to a fresh two-month-high. Get your market update from @JStanleyFX here:
  • S&P 500 contending with its proverbial ‘line in the sand’ as bulls and bears battle for directional control. How we close/trade around the 50-day moving average could serve as a noteworthy bellwether for risk trends headed into next week. I remain cautious below ~4,480. $SPX $ES
  • USD/JPY trades to a fresh monthly (110.57) amid the pickup in longer-dated US Treasury yields, and the exchange rate may stage a larger advance over the coming days. Get your market update from @DavidJSong here:
  • US yields continue to climb, with the 10-year Treasury yield trading above 1.45% $ZN $ZB
  • $USDJPY bull thesis appears quite constructive. Technicals show topside breakout above trend resistance following a period of consolidation. Bond yields providing the fundamental catalyst. Eyes on Aug/YTD highs. A broad-based deterioration in market sentiment poses downside risk.
  • WTI posting another session of strong gains, currently flirting with the 74 handle $CL #Oil #OOTT
  • The New Zealand Dollar’s bullish breakout attempt in early-September was rebuffed. Price action at the end of the month is telling a different story. Get your market update from @CVecchioFX here:
  • So much for that Evergrande recovery. Shares of the troubled Chinese property developer are down approximately -12% today following yesterday's impressive rally (biggest in a year)
  • Retail trading platform Robinhood announces hire of new Chief Compliance Officer amid regulatory scrutiny
Gold Forecast: XAU/USD at the Mercy of a Fiscal Stimulus Deal

Gold Forecast: XAU/USD at the Mercy of a Fiscal Stimulus Deal

Rich Dvorak, Analyst


  • Gold outlook still hinges on stimulus deal expectations and corresponding swings in real yields
  • XAU/USD price volatility could persist as uncertainty surrounding fiscal aid and COVID-19 linger
  • Precious metals might stay supported more broadly as the Fed balance sheet hits all-time highs

Gold price action fluctuated within a 2% range over the last five trading sessions only to finish flat on the week. The precious metal continues to seek a bullish catalyst to fuel a breakout from its consolidation pattern, and in light of murkiness surrounding fiscal stimulus negations, gold prices could keep drifting broadly sideways.


Gold Price Chart Inflation Expectations

Despite the notable rise in US Treasury rates over the last several weeks, the price of gold has largely kept afloat thanks to climbing inflation expectations. In fact, the 5-year forward inflation swap rate has jumped to 2.19%, which marks a fresh post-crisis high, and helps keep pressure on real yields. Inflation expectations rising faster than interest rates causes real yields to move lower, which is a bullish fundamental driver for gold prices.

Inflation expectations have potential to gain further ground with the prospect of another comprehensive fiscal aid package before the November 2020 election in focus. If US politicians can strike a stimulus deal, gold prices could stage an explosive move higher with inflation expectations.

Even if an agreement on stimulus cannot be reached prior to the election, inflation expectations could still stay relatively elevated if odds of a democratic sweep remain intact, as this would likely correspond with an even bigger stimulus deal early next year. That said, potential for a gridlocked congress could undermine inflation expectations and weigh negatively on gold price action.


Gold Price Chart Fed Balance Sheet Total Assets

Resurfacing coronavirus concerns as new cases spike and governments reimpose restrictions on business activity presents another bearish threat to gold outlook. Yet, gold prices and inflation expectations could remain bolstered by Fed balance sheet growth. FOMC asset purchases have mounted and just pushed total assets held by the Federal Reserve to a new record high of $7.18-trillion.

Learn More - How to Trade Gold: Top Gold Trading Strategies & Tips


XAU USD Price Chart Forecast Gold to US Dollar Index Correlation

Chart by @RichDvorakFX created using TradingView

Explosive Fed balance sheet growth, which is expected to continue at the current pace according to recent commentary from Fed officials, underpins the anti-fiat narrative and investor demand for gold. Correspondingly, the direction of gold might mirror the US Dollar Index due to the strong inverse relationship generally maintained by the two safe-haven assets.

Gold prices could spike higher with potential for the US Dollar to weaken further if fiscal stimulus optimism can outshine skepticism. XAU/USD could decline, however, if the US Dollar strengthens as coronavirus concerns take hold and inflation expectations gravitate lower.

Learn More - US Presidential Election Timeline & Implications for Gold Prices

-- Written by Rich Dvorak, Analyst for

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.