|

Gold Price Forecast: XAU/USD looks north with a triangle breakout in play

  • Gold price looks to revisit two-week highs above $2,050 early Thursday.
  • US Dollar and Treasury bond yields look to US jobs data after the hawkish Fed.   
  • Gold price confirmed a triangle breakout amid a bullish daily RSI.

Gold price is back in the green, on its way to retest the two-week high of $2,056 set on Wednesday. The US Dollar (USD) is fading its uptick amid a renewed appetite for risk assets, as markets cheer China’s fiscal support while assessing the US Federal Reserve (Fed) interest rate outlook.

Gold price regains poise, as focus shifts to US jobs data

China's Vice Finance Minister Wang Dongwei announced on Thursday that they “will appropriately increase investment under the central government budget”, which “will help expand domestic demand.”

This comes after China’s Caixin Manufacturing Purchasing Managers Index (PMI) remained at 50.8 in January, suggesting a steady growth in the country’s manufacturing sector. The market consensus was for a 50.6 reading.

The further boost to risk sentiment in Asia faded the uptick in the US Dollar, motivating Gold buyers to regain control. Additionally, the persistent weakness in the US Treasury bond yields across the curve is also helping the non-yielding Gold price to recover lost ground.

US Treasury bond yields came under the bus on Wednesday and smashed the US Dollar alongside after the ADP Employment Change data came in below estimates at 107K and following the Treasury Department’s quarterly announcement that it would sell $121 billion in notes and bonds next week, up from $112 billion last quarter.

 However, a relatively hawkish tone delivered by the Fed, following the conclusion of its two-day policy meeting, failed to offer any respite to the US Treasury bond yields while the US Dollar jumped on the Fed’s pushback against a March rate cut. The US central bank extended the pause, as Fed Chair Jerome Powell said "based on the meeting today, I don't think likely we will have a rate cut in March."

Markets are currently pricing in a 35% probability that the Fed will cut rates in March while for May the odds stand at 92%.

All eyes now turn toward Friday’s US Nonfarm Payrolls data to affirm the pushback to May for the Fed to lower the interest rates. Ahead of that, traders will look to the US Jobless Claims, Unit Labor Cost (Q4) and the ISM Manufacturing PMI data for fresh trading impetus in Gold price. The upcoming data could help reprice the market’s expectations for the dovish Fed pivot.

Gold price technical analysis: Daily chart

As observed on the daily chart, Gold price confirmed an upside break from a month-long symmetrical triangle formation after closing convincingly above the falling trendline resistance at $2,036 on Wednesday.

The 14-day Relative Strength Index (RSI) indicator points north above the midline, suggesting that there is enough room for the upside.

Traders have paid little attention to the Bear Cross validated on Tuesday after the 21-day Simple Moving Average (SMA) crossed the 50-day SMA from above on a daily closing.

With the bullish bias likely intact in Gold price, the immediate strong resistance is seen at the previous day’s high of $2,056, above which the December 12 high of 2,062 wil be tested. Further up, the $2,070 round figure could challenge bearish commitments.

On the downside, powerful support continues to remain at the $2,030 region, where the 21- and 50-day Simple Moving Averages (SMA) hang around.

Acceptance below the latter could reinforce the selling interest for a test of the triangle support at $2,016. If the downside momentum gains traction, a test of the key $2,000 threshold could be in the offing.  

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

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.

More from Dhwani Mehta
Share:

Editor's Picks

AUD/USD tests 0.7000 as RBA hike looms amid risk-off mood

The Australian Dollar began the week on a lower note against the US Dollar, at around 0.7000, as depicted in the AUD/USD daily chart, as investors brace for the Reserve Bank of Australia monetary policy decision following optimistic US economic data.





USD/JPY climbs to 158.00 neighborhood as BoJ uncertainty weighs on the JPY

The USD/JPY pair gains some positive traction at the start of a new week, recovering further from Friday's post-Bank of Japan (BoJ) swing low to sub-157.00 levels. The momentum lifts spot prices to the 158.00 neighborhood during the Asian session and seems unaffected by fresh intervention warning from Japan's Finance Minister Satsuki Katayama.

Gold recovers on positive US-Iran headlines

Gold extends its recovery during American trading hours on Monday, supported by falling Oil prices following positive headlines on US-Iran talks. The metal regains ground after hitting a fresh yearly low of $3,870 on Friday and ending October down 6.87%. However, the rebound lacks conviction as the fundamental backdrop continues to raise doubts over a sustained recovery.

RBA expected to raise interest rate to 4.85%

The Reserve Bank of Australia will announce its monetary policy decision on Tuesday and is widely anticipated to raise the Official Cash Rate by 25 basis points to 4.85% from 4.6%. If the RBA delivers as expected, it will be the fifth interest rate hike of 2026, and the OCR will hit an 18-year high.

Strong iPhone sales fortify Apple's Q4 result

A robust fourth-quarter for Apple's iPhone sales helped the tech titan beat Wall Street's consensus on Monday. Apple reported $57.58 billion in iPhone sales in Q4, beating the average analyst estimate by more than a billion. However, AAPL stock shed close to 4% afterhours despite the top and bottom line beat.

The 2% inflation target came from a throwaway remark. It now moves trillions
The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.