Gold Price Forecast: XAU/USD needs to take out $1,960 resistance for further upside

• Gold price begins February with a bang, reclaiming $1,950 on a dovish US Federal Reserve outlook.
• Fed Chair Jerome Powell smashes the United States Dollar with US Treasury bond yields.
• Focus now shifts to the policy decisions from the Bank of England and the European Central Bank.
• Gold price eyes acceptance above the $1,960 supply zone to initiate a fresh uptrend.

Gold price is sitting at the best levels seen in the last ten months above $1,950, as bulls take a breather after two back-to-back days of solid gains. The United States Dollar (USD) is licking its wounds, despite a bounce in the US Treasury yields so far this Thursday. All eyes now turn toward the next central banks’ decisions, with the Bank of England (BoE) and the European Central Bank (ECB) in the spotlight.  

BOE and ECB policy decisions could add to the US Dollar’s misery

The US Dollar has paused its sell-off amid a minor bounce in the US Treasury bond yields, as the overnight risk rally loses steam in anticipation of yet another volatile trading session. The Bank of England and European Central Bank take center stage this Thursday, with the US Federal Reserve out of the way. Both the central banks are likely to deliver a 50 basis points (bps) rate hike but the European Central Bank is likely to come out relatively hawkish, despite the sharp decline in the Eurozone headline inflation to 8.5% in January.

Should ECB President Christine Lagarde reiterate her hawkish message and hint at another 50 bps rate hike at the next meeting, the EUR/USD pair will see a fresh rally, which could weigh heavily on the US Dollar across the board. The renewed downside in the US Dollar is likely to offer the much-needed boost to the USD-denominated Gold price.

Meanwhile, the Bank of England’s potential dovish shift in the policy could be overlooked amid a hawkish ECB outlook. The BoE is set to signal a slower pace of rate hikes going forward amid looming recession risks and tight labor market conditions.

Federal Reserve verdict reads out dovish

The United States Dollar came under intense selling pressure and erased the initial spike, led by the expected 25 bps Fed rate hike announcement after Federal Reserve Chairman Jerome Powell said repeatedly at the post-policy meeting news conference that the "disinflationary" process that now appeared to be underway. His comments hinted at the Fed likely turning a corner on its tightening cycle. Meanwhile, Powell’s refraining to push back against easing financial conditions while opening the door for rate cuts, conditional on faster falls in inflation, ramped up expectations of a dovish ‘Fed pivot’ narrative and smashed the US Dollar alongside the US Treasury yields. The non-interest-bearing Gold price tends to benefit dovish Federal Reserve expectations. Futures pricing for the US Fed Terminal Rate fell to under 4.9% following Powell's comments, with the end-2023 Fed Funds Rate seen below 4.4%, as markets priced in rate cuts, according to Reuters’ FedWatch.

Gold price technical analysis: Daily chart

Folowing the dovish Federal Reserve outcome, the tide seems to have turned in favor of Gold buyers once again, as reflected in the Gold price technical setup on the daily chart.

The 14-day Relative Strength Index (RSI) is probing the overbought territory, suggesting that further upside remains in place for the bright metal.

Gold price needs to find acceptance above the immediate resistance near the $1,960 level in order to initiate a sustained uptrend toward the April 2022 high just shy of the $2,000 mark.

Any pullbacks from higher levels could see the Gold price challenging the previous week’s high at $1,949, below which a fresh correction toward the $1,920 region cannot be ruled.

The bullish 21-Daily Moving Average (DMA) at $1,912 will continue to guard the downside should the corrective move gather steam.