Gold Price Forecast: XAU/USD’s further upside hinges on Fed’s Jerome Powell

Gold price has entered a phase of bullish consolidation near $1,950, having reached an over two-month high at $1,963 on Wednesday. Gold buyers are biding time ahead of Thursday’s speech by US Federal Reserve (Fed) Chair Jerome Powell, which will have a sigificant impact on the United States Dollar (USD) and Gold price valuations. 

All eyes on Fed Chair Jerome Powell’s speech

Gold price continued to find support from escalating Middle East tensions, especially after a deadly Israeli strike at a Gaza hospital, which killed at least 500 people, including women and children. A UN-run school housing refugees was also struck. Although the Israel Defense Forces (IDF) did not take any responsibility for the attack.

US President Joe Biden’s arrival in Israel and his early comments also added to the ongoing tensions between Hamas and Israel. President Biden said that “the US will make sure Israel has what it needs to defend itself."

Broad risk-aversion on simmering geopolitical tensions and surging Oil prices underpinned the safe-haven demand for the Gold price, as well as, the US Dollar. The US Dollar also benefited from the ongoing uptrend in the US Treasury bond yields across the curve, in the wake of increased expectations for the Fed to keep interest rates higher for longer.

New York Fed President John Williams said on Wednesday, interest rates will need to stay high for a while to get inflation back to the central bank's 2% target. Fed Governor Christopher Waller said that he would like the central bank to wait on any further interest rate hikes while it evaluates the direction of the US economy and inflation. In a separate speech, Fed Governor Michelle W. Bowman agreed that inflation has come down but it is still too high.

Amidst the advances in the US Dollar and the US Treasury bond yields, Gold price retreated from over two-month highs to settle Wednesday below the $1,950 psychological level.

So far this Thursday, Gold price is gathering pace for the next push higher while awaiting Fed Chair Powell’s speech at the Economic Club of New York Luncheon. His words on the policy outlook will be closely scrutinized after the recent dovish comments from several Fed officials. Markets are currently pricing a November Fed pause but odds of a December rate hike are seen around 37%.

Ahead of Jerome Powell’s speech, the US Jobless Claims and Existing Home Sales data will be watched out for. Gold traders will also keep a close eye on the US corporate earnings results and the Middle East geopolitical developments.

Gold price technical analysis: Daily chart

The Gold price recaptured the critical 200-Daily Moving Average (DMA) at $1,930 on a daily closing basis but failed to settle above the $1,950 level on Wednesday.

However, risks appear skewed to the upside for Gold price, as the 14-day Relative Strength Index (RSI) indicator continues to hold well above the midline.

The next upside hurdle is seen at the July 31 high of $1,972, above which the July 27 high of $1,982 will be challenged.

If Gold buyers find a foothold above the latter, a test of the July 20 high of $1,988 cannot be ruled out.

Rejection once again above the $1,950 psychological level will recall Gold sellers, putting the focus back on the 200 DMA resistance-turned-support at $1,930.

Further down, the 100 DMA at $1,922 will lend support to Gold buyers. The last line of defense for them is seen at Tuesday’s low $1,912.