Gold Price Forecast: Will XAU/USD breach $1,850 on Fed Chair Powell’s speech?

Gold price is looking to build on the previous recovery gains this Tuesday, as the United States Dollar retreats further from four-week highs against its major peers. Risk sentiment remains in a better spot after setting off the week on a tepid note.

Federal Reserve Chair Jerome Powell’s word in focus

After the stunning January labor market report from the United States released on Friday, all eyes remain on US Federal Reserve Chairman Jerome Powell’s appearance on Tuesday. Powell is due to participate in a moderated discussion at the Economic Club of Washington DC at 17:00 GMT. His take on the US jobs data and the future policy course will have a significant impact on the US Dollar trades, eventually influencing the USD-denominated Gold price.

Meanwhile, US Treasury Secretary Janet Yellen, who appeared on ABC News on Monday morning ahead of Wednesday’s President Joe Biden’s State of the Union speech, said that “the economy remains on a path where a recession can be avoided.” “What I see is a path in which inflation is declining significantly, and the economy is remaining strong,” Yellen added.  

United States Dollar takes a breather

The US Dollar extended it's run up alongside the US Treasury bond yields at the start of the week, as investors fanned expectations of the continuation of the Federal Reserve rate hikes, with the peak rate likely to go beyond 5.0% The United States Nonfarm Payrolls jumped 517,000 against expectations of 185,000. The unemployment Rate in the United States defied forecasts of a rise to 3.6%, falling to 3.4% from 3.5%. The upbeat US ISM Services PMI and its sub-indices also strengthened the recovery momentum in the US Dollar.

According to Reuters’ FedWatch, futures pricing shows that markets are expecting the Fed funds rate to peak just above 5.1% by July, compared with expectations of less than 5.0% prior to Friday's jobs report.

At the moment, the US Dollar is pulling back from monthly highs, as investors turn on the sidelines ahead of Jerome Powell’s speech. A fresh round of volatility is likely to be triggered by his comments, which could offer a fresh boost to the US Dollar at the expense of the Gold price.

Gold price technical analysis: Daily chart

Nothing seems to have changed technically for Gold price, as the last week’s downside break below the critical short-term ascending 21-Daily Moving Average (DMA), now at $1,912, continues to keep sellers in control.

The 14-day Relative Strength Index (RSI) remains beneath the midline, supporting the downside bias in the Gold price.

The four-week low of $1,860 needs to give way to initiate a fresh downswing toward the $1,850 psychological mark, where the bullish 50DMA aligns.

A sustained break below the latter will see further declines toward the January 5 low of $1,825.

Alternatively, Gold price could revisit the previous day’s high at $1,881 should the recovery regain traction. The next powerful barrier is seen at the $1,900 threshold.

Further up, the flattish 21DMA will be a tought nut to crack for Gold buyers.

It’s worth noting that Gold price remains exposed to downside risks so long as it stays below the 21DMA barrier.