Gold Price Forecast: XAU/USD focuses on weekly close above $2,033
- Gold price makes another run toward the $2,033 barrier amid an upbeat mood on Friday.
- US Dollar sellers ignore positive US Treasury bond yields and hawkish Fedspeak.
- Gold price remains poised for a firm break above $2,033, as a falling wedge breakout remains in play.
Gold price is replicating the same moves seen in Thursday’s Asian trading, as buyers attempt another run toward the key contention level of $2,033 early Friday. The US Dollar continues to display a subdued momentum, despite the hawkish Fedspeak and positive US Treasury bond yields, as Gold traders await comments from US Federal Reserve’s (Fed) policymakers later on Friday.
Gold price eyes more Fedspeak
The Asian stock markets continue to cheer the overnight AI optimism wave seen on the Wall Street indices, in the wake of the encouraging earnings report from the US chipmaker Nvidia.
The safe-haven US Dollar bears the brunt of the risk-on market profile, motivating Gold buyers to regain upside traction. However, the continued downfall in China’s House Price Index combined with mixed global business PMI data and hawkish Fedspeak seem to take the wind out of the ongoing risk rally. S&P Global Manufacturing PMI improved to 51.5 from 50.7 in February, while S&P Global Services PMI edged lower to 51.3 from 52.5.
Further, the US Treasury bond yields staged a modest comeback, as Fed policymakers kept pushing back against expectations of early and aggressive Fed interest rate cuts. Fed Governor Christopher Waller said late Thursday that there is no rush to begin cutting interest rates. Governor Lisa Cook noted that policy rates will change when disinflation looks sustainable. Meanwhile, Fed Vice Chair Phillip Jefferson said that “it will likely be appropriate to begin cutting policy rates later this year.
If the risk-on mood wanes in the upcoming sessions, it could fuel a fresh uptrend in the US Dollar and Gold price could once again run into sellers at higher levels. Therefore, the Gold price action now remains in the hands of the broad market sentiment and the US Dollar dynamics, as traders brace for more Fedspeak.
Also, the end-of-the-week flows could remain in play, spiking up volatility around the Gold price later in American trading.
Gold price technical analysis: Daily chart
The short-term technical outlook for Gold price remains more or less the same, as the bright metal remains poised to break higher through the crucial 50-day Simple Moving Average (SMA) hurdle at $2,033 on a weekly closing basis.
The technical setup remains in favor of further upside, especially after the Gold price confirmed a falling wedge breakout above the descending trendline resistance of $2,018 earlier in the week.
Gold buyers will need to find a strong foothold above the 50-day SMA at $2,035 to aim for the February 7 high of $2,044, followed by the $2,050 psychological barrier.
The 14-day Relative Strength Index (RSI) sits just above the midline, backing the bullish potential in Gold price.
On the contrary, if Gold buyers face rejection once again at the 50-day SMA, the 21-day SMA at $2,023 will be back on the sellers’ radars. A failure to defend the latter could fuel a fresh downswing toward $2,004, the confluence of the wedge resistance-turned-support and the upward-pointing 100-day SMA.
Ahead of that, Tuesday’s low of $2,015 could come to the rescue of Gold optimists.
(This story was corrected on February 23 at 03:37 GMT to remove a reference about the upcoming publication of the Federal Reserve Monetary Policy Report, which isn't due on Friday.)
Gold FAQs
Why do people invest in Gold?
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Who buys the most Gold?
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
How is Gold correlated with other assets?
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
What does the price of Gold depend on?
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
