Gold Price Forecast: Will XAU/USD defend 21 DMA at $1,843 on Fed Chair Powell?

Gold price is resuming the recent uptrend toward the three-week high of $1,858 on Tuesday, reversing a temporary drop seen a day before. The United States Dollar (USD) is licking its wounds, as traders refrain to place any fresh bets ahead of the US Federal Reserve (Fed) Chairman Jerome Powell’s testimony.

Federal Reserve Chair Jerome Powell in the spotlight

Federal Reserve Chair Jerome Powell will testify on the semi-annual monetary policy report on Tuesday to the Senate Banking Committee and on Wednesday to the House Financial Services panel. Powell is unlikely to give any significant cues on the Federal Reserve’s policy path ahead of Friday’s critical Nonfarm Payrolls data from the United States and next week’s Consumer Price Index (CPI) report. Although markets will try to read between the lines, which could affect their pricing of the Federal Reserve policy move beyond March.

Investors will closely pay attention to any hints on the size of the March Fed rate hike, as markets are wagering nearly a 30% probability of a 50 basis points (bps) rate hike. Also, Powell’s comments could help build renewed expectations around the central bank’s terminal rate, which is currently seen at around 5.50% following January’s stunning US employment data and hot Consumer Price Index data.

Weak United States Dollar underpins Gold price rebound

Ahead of Federal Reserve Chairman Jerome Powell’s testimony, the US Dollar has entered a phase of downside consolidation, as the benchmark US 10-year Treasury bond yields continue to stay depressed below the 4.0% key level. This has allowed the Gold buyers to find a new motivation this Tuesday after seeing a correction from three-week highs at the start of the week.

Mixed sentiment in the US session overnight and upbeat Factory Orders data from the United States failed to offer any lift to the US Dollar, as traders adjusted their USD positions ahead of an action-packed week. Besides, Fed Chair Jerome Powell’s testimony, all eyes also remain on Friday’s Nonfarm Payrolls data from the United States for fresh policy guidance.

Gold price technical analysis: Daily chart

Having tested the critical bearish 21-Daily Moving Average (DMA) support at $1,844 on Monday, Gold bulls are trying their luck to stage a rebound from that area.

The 14-day Relative Strength Index (RSI) is looking to yield a sustained move above the 50.00 level, trading neutral at the time of writing.

Should the recovery momentum pick up pace, the Gold price rebound could retest the multi-month high at $1,858.

Further up, the mildly bullish 50 DMA at $1,870 could be challenged. At that level, Valentine’s Day high aligns.

Recapturing the latter is critical to sustaining the Gold price recovery from two-month troughs of $1,805.

Alternatively, daily closing below the 21 DMA could call for a bearish reversal, opening floors for a test of Friday’s low of $1,835.

Additional declines will threaten the $1,830 round level.