Gold Price Forecast: XAU/USD bulls await US Retails Sales, FOMC minutes for fresh impetus

Gold attracted some dip-buying near the $1,850 region on Wednesday and moved away from the weekly low touched the previous day. It is worth recalling that the XAU/USD witnessed a dramatic turnaround from the eight-month high on Tuesday after Russia announced a partial pullback of troops from the Ukraine border. This helped ease fears about a significant military action/confrontation with the West and triggered a fresh wave of the global risk-on trade, which, in turn, weighed heavily on the safe-haven metal.

The said, a broad-based US dollar weakness helped limit any further losses and assisted the dollar-denominated gold to regain some positive traction. The commodity maintained its bid tone through the first half of the European session and was last seen trading around the $1,857 region. The uptick, however, lacked bullish conviction amid expectations that the Fed would adopt a more aggressive policy to combat high inflation. This held back traders from placing fresh bullish bets around the non-yielding yellow metal.

The prospects for a faster policy tightening by the Fed, along with rising bets for a 50 bps rate hike in March were reinforced by elevated US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond held above the 2.0% threshold, closer to last week's swing high touched in reaction to the hottest inflation reading in four decades. Moreover, the 2-year, which are highly sensitive to rate hike expectations, stood tall near the highest level since May 2019 and acted as a headwind for gold.

Hence, the focus will remain glued to the release of the FOMC meeting minutes, due later during the US session. Investors will look for fresh clues about the likely pace of the Fed's policy tightening cycle, which, in turn, would determine the next leg of a directional move for gold prices. In the meantime, the US monthly Retail Sales data might provide some impetus to the XAU/USD. This, along with the US bond yields, the USD price dynamics and the broader market risk sentiment, would allow traders to grab some opportunities.

Technical outlook

From a technical perspective, the previous day's sharp pullback failed to validate a near-term bullish breakout through a downward sloping trend-line extending from June 2021 swing high. That said, the emergence of fresh buying on Wednesday still favours bullish traders and supports prospects for additional gains. Hence, a move back towards the $1,871 intermediate resistance, en-route the multi-month high near the $1,879-$1,880 region, remains a distinct possibility. Gold could eventually climb to reclaim the $1,900 mark for the first time since June 2021.

On the flip side, the $1,850 area, closely followed by the overnight swing low, around the $1,844 region, now seems to protect the immediate downside. A convincing break below might shift the near-term bias in favour of bearish traders and accelerate the corrective pullback towards the next relevant support near the $1,832-$1,830 region.

Gold daily chart

Key levels to watch