Gold Price Forecast: Federal Reserve minutes could help XAU/USD confirm a bull flag

Gold price is treading water in early Wednesday’s trading, looking to extend the previous upbeat momentum. Favorable daily technical setup and a broadly weaker US Dollar (USD) alongside the US Treasury bond yields keep Gold price underpinned, Traders brace for a fresh batch of critical economic data from the United States (US) and the Federal Reserve (Fed) November meeting minutes.

United States data, Federal Reserve minutes hold the key for US Dollar

Amidst a relatively data-light and holiday-shortened week, the high-tier United States economic data due for release on Wednesday will hog the limelight, as it could provide fresh hints on the US Federal Reserve’s interest rate outlook. The United States Durable Goods Orders for October are foreseen at 0.4% while the S&P Global Preliminary Manufacturing and Services PMis are seen heading into contraction for November. Softer economic data from the United States could bolster expectations of smaller rate increases in the coming months, with markets now pricing about 75% odds of a 50 basis points (bps) rate hike in December.

Meanwhile, the Federal Reserve November meeting minutes will be closely scrutinized too for fresh signals on the central bank’s future policy course, especially after Federal Reserve Chair Jerome Powell said at the November meeting press conference that the United States interest rates will go higher than earlier projected. Therefore, the Federal Reserve’s Statement of Economic Projections (SEP) alongside the Dot Plot chart will hold the key to determining the peak rate.

US Dollar fails to cheer China covid woes-led cautious mood

Despite a risk rally seen on Wall Street indices, investors stay cautious amid the pre-Fed minutes anxiety. However, China’s relentless rise covid cases and intensifying restrictive measures remain the main reason for the pause in risk-on trading in Asia so far this Wednesday. China's capital Beijing reported 388 symptomatic new locally transmitted COVID-19 infections and 1,098 asymptomatic cases for Nov. 22. Reuters reported that the Chinese city of Chengdu will conduct mass COVID-19 testing for its residents from Nov. 23 to Nov. 27. “In Shanghai, rules were tightened for people entering the city as the country grapples with a spike in COVID cases, sparking worries about its impact on the economy,” FXStreet’s Analyst Ross J. Burland explained.

The cautious risk tone fails to revive the safe-haven demand for the US Dollar, as the US Treasury bond yields extend losses despite a relatively hawkish commentary from the US Federal Reserve policymakers. Kansas City Fed President Esther George said on Tuesday, the Federal Reserve may need to raise interest rates to a higher level and hold them there to successfully bring down high inflation. Meanwhile, Cleveland Fed president Loretta Mester reiterated that getting inflation down remains critical for the central bank.

Gold price technical outlook: Daily chart

The wait for a bull flag confirmation almost seems over, as Gold price holds fort above the falling trendline resistance at $1,737 after closing in the green for the first time in five days on Tuesday.

Daily closing above the latter is critical to validate the bullish continuation pattern and revive the uptrend toward the three-month highs of $1,787. Ahead of that, bulls will face immediate hurdles at the psychological $1,750 level and this week’s high near $1,770.

The 14-day Relative Strength Index (RSI) is holding firmer above the midline, endorsing the bullish potential. Adding credence to a likely upside, the upward-sloping 21-Daily Moving Average (DMA) is on the verge of cutting the mildly bearish 100DMA from below, portraying an impending bull cross.

On the flip side, a strong cushion is seen at Monday’s low of $1,733, below which the falling trendline support at $1,712 will be tested. At that level, the 100DMA creeps in.  Further south, the bullish 21DMA at $1,708 will come into play, offering the last line of defense for the Gold price.