Gold Price Forecast: XAU/USD bears take on critical structure after European Central Bank meeting

Gold price is tinkering on the edge of a significant blow-off to the downside in the coming days. At the time of writing, XAU/USD is trading down 1.85% and has done most of the leg work for a move much lower. In prior analysis, a downside case has been advocated given the length of the bull rally and the recent breakdown of the Gold price bullish structure is compelling.

The Gold price has dropped from a bull cycle high made on the same day of $1,959.77 and has marked a low of $1,911.87, so far. However, critically, the Gold price has broken $1,918 and should there be a close below here on a daily basis, the bears will have made an impressionable mark on the charts for the week ahead. See below for the technical analysis of the Gold price. M

eanwhile, it has been a game of two halves so far this week with a series of fundamentals playing into both the US dollar and the Gold price. We are now moving into extra time with the Nonfarm Payrolls that will possibly be the deciding factor for both assets.

Federal Reserve and European Central Bank did little to support Gold price

Firstly, the Federal Reserve, Fed, event concluded with a dovish tilt that sank the US Dollar to fresh bear cycle lows of 100.82 as per the DXY index that followed the Federal Reserve's chairman Jerome Powell's dovish rhetoric when he said he is seeing signs of disinflation. Consequently, US Treasury Bond yields were sharply lower, bullish for gold as it offers no interest. The yield on the US 10-year Treasury note dropped to a low of 3.334%. 

• Federal Reserve: The rate peak is in sight – Commerzbank

The Federal Reserve raised its key interest rate corridor by 25 basis points to 4.50%-4.75%, as expected. In the view of economists at Commerzbank, the Federal Reserve is unlikely to do much more before it reaches its rate peak and that sentiment was weighing on the US Dollar.

Then, however, the European Central Bank, ECB, came in with a less hawkish than proffered rhetoric that the Euro bulls would have hoped for which sank the Euro, supporting the US Dollar, and propelling the Gold price lower for the day after previously touching a 10-month high.

All in all, Gold price markets are coming around to the fact that while the United States of America's inflation pace may be trending down, the Federal Reserve will have a much harder time getting it down to its desired 2% target considering the labour market shortages, which segues us into the Nonfarm Payrolls on Friday.

Nonfarm Payrolls, expectations for Gold price

The US labour market and Nonfarm Payrolls event is a critical component of the US interest rate outlook. Analysts at TD Securities are projecting payroll gains to have stayed largely unchanged vs December, posting a still solid 220k increase in January. ''Both the Unemployment Rate and average hourly earnings should have remained steady: the former at a decades-low 3.5%, and the latter printing a 0.3% MoM gain,'' the analysts explained. ''Note that the January jobs report will also include important revisions to the establishment survey data for 2022,'' they added. 

Such an outcome could provide fuel to the US Dollar's correction from the bear cycle lows and would therefore be expected to weigh on the Gold price. However, a weaker report, analysts at TD Securities warn, or an ''indication of softness will reinforce'' risk sentiment, which could be bullish for the Gold price and bearish for the US Dollar. 

Gold technical analysis

The Gold price is breaking down structure, (BoS) on the daily chart and a correction of the daily bearish impulse could result in further selling pressure from the bears. However, a commitment from the Gold price bulls to above $1,920/30 4-hour resistances could leave the bulls in play for the foreseeable future:

All will be revealed for the Gold price over the United States of America Nonfarm Payrolls event on Friday one way or another.