Gold Price Forecast: XAU/USD bulls seem to lack conviction on the road to recovery

Gold price is attempting another run toward the $1,900 this Wednesday, building on its recovery from four-week troughs of $1,860. The latest uptick in the Gold price could be associated with a broadly subdued United States Dollar.

Federal Reserve Chair Jerome Powell checks US Dollar recovery

US Federal Reserve (Fed) Chairman Jerome Powell participated in a moderated discussion at the Economic Club of Washington DC on Tuesday. Markets eagerly anticipated a hawkish take from Powell on the interest rates outlook following Friday’s sold United States employment report. The United States Nonfarm Payrolls jumped 517,000 against expectations of 185,000 on Friday. 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 jobs data bolstered expectations of a Fed terminal rate beyond 5.0%.

Powell’s comments were not read as hawkish enough, which triggered a sharp sell-off in the US Dollar, checking its recovery from ten-month lows. Instead, investors cheered Powell’s comments on disinflation, hoping that the start of the disinflationary process could prompt the central bank to slow further down on its interest rate hike campaign. Wall Street indices climbed, lifting the overall market mood and weighing down the US Dollar. However, the US bond market continued its rout, sending the US Treasury bond yields to multi-week highs, which capped the rebound in the Gold price.

Federal Reserve policymakers dominate this week

Besides, the Gold price also faced headwinds from the hawkish commentary from the Minneapolis Fed President Neel Kashkari. Kashkari said that the Federal Reserve would perhaps have to raise interest rates to at least 5.4% to tame high inflation, adding that the strength of the US labor market makes chances of a recession less likely.

Looking ahead, amid data-light economic data from the United States, all eyes will remain on the speeches from the Federal Reserve policymakers for fresh guidance on the world’s most powerful central bank’s monetary policy outlook. New York Fed President John Williams, Atlanta Fed Chief Raphael Bostic and Governor Christopher Waller are due to speak later on Wednesday. US interest-rate futures show that markets expect the Fed funds rate to peak just above 5.1% by June.

Gold price technical analysis: Daily chart

Gold price is carving out a potential bear flag on the daily chart, following the last week’s downside break below the critical short-term ascending 21-Daily Moving Average (DMA), now at $1,912.

The 14-day Relative Strength Index (RSI) is inching higher but still lurks below the midline, suggesting that Gold sellers still have the upper hand.

But the higher lows seen so far this week keep Gold buyers hopeful for a decent recovery. It’s worth reminding that Gold price remains vulnerable so long as the 21DMA resistance holds.

For a sustained move higher, Gold price needs to take out strong resistance around $1,885. The $1,900 threshold will be next on Gold buyers’ radars.

On the flip side, the four-week low of $1,860 is the immediate support, below which the bullish 50DMA at $1,853 could rescue bulls.  

Acceptance below the latter will trigger a fresh downswing toward the January 5 low of $1,825.