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Gold Price Forecast: XAU/USD bears are on the prowl after United States Gross Domestic Product strength

  • Gold price is now looking over the abyss with a break of $1,900 eyed. 
  • The Gold price bears moved in on the strong United States of America data on Thursday.
  • The Federal Reserve sentiment is now mixed, supporting the US dollar and US Treasury yields higher. 

Gold price dropped to a low of $1,918.69 on Thursday due to a stronger US Dollar on generally solid United States of America economic data on the day that may prompt the Federal Reserve, Fed, to keep interest rates higher for longer. The market was wrong-footed in anticipation of ongoing disinflationary numbers and this has led to a move up to a critical technical level in the US Dollar in the set-up for the next bout of important data from the US economy. 

The rally in the US Dollar comes after the United States of America reported its fourth-quarter Gross Domestic Product as rising by 2.9%, more than the consensus estimate for a 2.8% rise. Initial jobless claims also fell more than expected, signalling a tight labour market. The combined data has led to the belief that the Federal Open Market Committee will turn back to dovish when it meets next week and ease off the interest-rate hike.

Gold price focus

 The focus will now then turn to the Personal Consumption Expenditure data on Friday before we head into the Federal Reserve meeting week. Ahead of this data, WIRP suggests a Federal Reserve interest rate hike of 25 bp on February 1 is fully priced in, with less than 5% odds of a larger 50 bp move.  Another 25 bp hike on March 22 was about 80% priced in, while one last 25 bp hike in Q2 is only 35% priced in. Nevertheless, those odds are likely a touch lower and for that, the IUS Dollar index was last seen up 0.40 points to 102.00 from a low of 101.504. US Treasury Bond yields were also on the rise, increasing the opportunity cost of owning gold. The US 10-year note was last seen paying 3.52% at the highest of the day.

Gold price and US Dollar technical analysis

In the prior analysis, it was argued that the Gold price was on track for a crash should the US Dollar burst to life given the placement of the price in the market structure at the time.

The US Dollar had been testing the daily trendline resistance as follows:

It was stated that if this were to break then the Gold price will likely be headed lower with the news scheduled for Thursday and now Friday as the catalysts

US Dollar, DXY, update

The US Dollar bulls have managed to eat into the trendline and this leaves the outlook for Gold price bearish. However, the US Dollar bears are attempting to correct within the W-formation, so there are prospects of a meanwhile recovery in the Gol price ahead of Fridsay's key data. 

Meanwhile, the Gold price was in a technically bullish trend as follows: 

But in the prior analysis, it was stated that the bullish trendline for the Gold price was vulnerable:

A break of Gold price structures was eyed for the days ahead so long as resistance held: 

A sell-off and capitulation of the Gold price would leave prospects of a test towards $1,900. 

Gold price update 

The bears have broken the trendline after the move into the highs and have subsequently moved in on the horizontal structure that guards a move lower to test bullish commitments above $1,900.

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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