Gold Price Forecast: XAU/USD could retake $1,920 amid weaker Treasury bond yields

Gold price is rising for the first time in four trading days this Thursday, as bears take a breather ahead of a fresh batch of economic data from the United States. The United States Dollar (USD) has paused its recovery momentum amid the persistent weakness in the US Treasury bond yields.

Gold price at the mercy of US Treasury bond yields

After the Bank of Japan's (BoJ) inaction triggered a massive sell-off in global yields, the US Treasury bond yields continue to remain on thin ice, with the two-year United States Treasury yields falling to the lowest level since October 2022. Weaker US Treasury bond yields tend to make the non-yielding Gold price more attractive. Disappointing United States Retail Sales, Producer Price Index (PPI) and Industrial Production data reignited concerns over the health of the US economy, reviving expectations of a potential recession later this year.

The Wall Street indices lost over 1% on growth fears, weighing negatively on Asian stocks. The risk-off flows extended into the United States government bond market, undermining the US Treasury bond yields across the curve. On the other side, the safe-haven US Dollar recovered swiftly on a renewed flight to safety but the further upside appears elusive should the US Treasury bond yields sell-off gather steam.

Mixed Federal Reserve commentary supports Gold price

Meanwhile, Gold price also draws support from a slew of conflicting messages from the US Federal Reserve policymakers, delivered on Wednesday. St. Louis Fed President James Bullard said US interest rates have to rise further to ensure that inflationary pressures recede. Cleveland Fed President Loretta Mester noted that the policy rate should rise a “little bit” above the 5% to 5.25% range that policymakers have collectively projected for the end 2023. Further, Kansas City Fed Chief Esther George also joined the hawkish chorus, citing that the Fed must restore price stability, ‘that means returning to 2% inflation’. However, Philadelphia Fed President Patrick Harker reiterated on Wednesday that he's ready for the Federal Reserve to move to a slower pace of interest rate rises. Dallas Fed Chief Lorie Logan also supported the case for 25 basis points (bps) rate increments going forward.

Recent series of downbeat United States economic data and heightening chances of 25 bps rate hikes in February and March by the US Federal Reserve continue to bode well for the non-interest-bearing Gold price. Gold traders will now look forward to the US weekly Jobless Claims, Housing Starts and Building Permits data for fresh trading impetus.

Gold price technical analysis: Four-hour chart

Gold price extends its trade within a pennant on the four-hour chart, with bulls continuing to guard the downside near the lower boundary of the formation at $1,897. At that point, the bullish 50-Simple Moving Average (SMA) emerges, making it a strong support.

Meanwhile, the immediate upside remains capped by the mildly bearish 21SMA at $1,913. The Relative Strength Index (RSI) is inching higher above the midline, having briefly dipped below the latter in the early European trading a day before.

Four-hourly candlestick close above the 21SMA hurdle will drive the recovery further toward the upper boundary of the pennant, aligned at $1,925. However, Gold buyers need to find a strong foothold above the $1,920 round level, at first.

On the downside, if sellers extend their control below the abovementioned key support, a sharp drop toward the $1,870 intermittent cap cannot be ruled out. Deeper declines will call for a test of the ascending 100SMA at $1,854.