Gold Price Forecast: XAU/USD remains confined in a multi-day-old range, looks to global PMIs

Gold price (XAU/USD) comes under some renewed selling pressure on Wednesday, albeit lacks follow-through and remains confined in a multi-day-old trading range through the early European session. Traders have now pushed back bets for an early interest rate cut by the Federal Reserve (Fed) in the wake of the strong US macro data, which suggested that the economy is in good shape. In fact, the current market pricing indicates a greater chance of the first interest rate cut in May, which was initially expected in March. Adding to this, the recent hawkish remarks by a slew of Fed officials forced investors to further scale back their expectations for a more aggressive policy easing in 2024. This, in turn, is seen as a key factor driving flows away from the non-yielding yellow metal.

The downside for the Gold price, however, remains cushioned amid the worsening geopolitical conditions in the Middle East, which tends to benefit the traditional safe-haven metal. The US carried out strikes in Iraq on Tuesday, targeting three facilities used by Iranian-affiliated militant groups in retaliation to missiles and drone attacks on American troops over the past several days. Apart from this, the emergence of some US Dollar (USD) selling, led by retreating US Treasury bond yields, helps limit losses for the commodity. Traders might also prefer to wait on the sidelines ahead of important macro releases – starting with the flash global PMIs on Wednesday, followed by the Advance Q4 GDP print and the Core PCE Price Index from the US on Thursday and Friday, respectively.

Apart from this, investors this week will take cues from the highly-anticipated European Central Bank (ECB) policy decision on Thursday, which might infuse volatility in the markets and produce short-term trading opportunities around the Gold price. Nevertheless, the aforementioned mixed fundamental backdrop warrants some caution before positioning for a firm near-term direction and ahead of the Fed's first policy meeting for 2024 on January 30-31.

Technical Outlook

From a technical perspective, the range-bound price action witnessed over the past few trading days points to indecision among traders over the near-term trajectory for the Gold price. That said, the recent repeated failures near the $2,040-$2,042 static resistance, along with the fact that oscillators on the daily chart have just started gaining negative traction, favour bearish traders. However, it will still be prudent to wait for some follow-through selling below the weekly low, around the $2,017-$2.016 area, before positioning for deeper losses.

The next relevant support is pegged near the $2,000 psychological mark, or over a one-month low touched last week. A convincing break below the latter will set the stage for the resumption of a well-established downtrend witnessed over the past four weeks or so. The Gold price might then accelerate the fall towards the 100-day Simple Moving Average (SMA), currently around the $1,974-$1,973 zone, before dropping to the very important 200-day SMA near the $1,964-$1,963 region.

On the flip side, the $2,040-$2,042 supply zone might continue to cap the immediate upside. A sustained strength beyond might trigger a short-covering rally and lift the Gold price to the next relevant hurdle near the $2,060-$2,062 region. The momentum could extend further, which should allow the XAU/USD to surpass the $2,078-$2,080 barrier and aim to reclaim the $2,100 mark for the first time since early December.

Gold 4-hour chart