Gold Price Forecast: XAU/USD bulls cheer Federal Reserve action ahead of United States Nonfarm Payrolls

Gold price (XAU/USD) makes rounds to the highest levels since late April 2022, close to $1,955 during the mid-Asian session on Thursday. In doing so, the yellow metal extends the US Federal Reserve (Fed) inspired run-up ahead of other major central bank announcements, as well as the US Nonfarm Payrolls (NFP).

Federal Reserve propels Gold price via dovish hike

Despite matching the market forecasts of 0.25% rate hike, the US Federal Reserve (Fed) managed to please the Gold buyers while mentioning in the Monetary Policy Statement that the inflation “has eased somewhat but remains elevated”.

Also bolstering the XAU/USD run-up was Fed Chair Powell’s press conference as the policy hawk surprised markets by saying, “We can declare that a deflationary process has begun.” The policymaker also accepts the need for rate cuts during late 2023 if inflation comes down much faster. Fed’s Powell also suggested that a couple more rate hikes are needed to reach it.

United States data also weigh on US Dollar and favor XAU/USD bulls

Other than the Federal Reserve outlook, the mostly downbeat United States statistics also weigh on the US Dollar and propel the XAU/USD price. That said, the US ISM Manufacturing PMI dropped to the lowest levels since June 2020 while marking 47.4 figure for January, versus 48.0 expected and 48.4 prior. Further, the ADP Employment Change also declined to a one-year low with 106K the latest figure compared to the 178K market forecasts and the upwardly revised previous figure of 253K. On the contrary, JOLTS Job Openings rose to 11.012M in December, crossing 10.25M consensus and 10.44M prior readings.

It’s worth noting that the US Dollar Index (DXY) licks its wounds near the lowest levels since April 2022, flirting with 101.00 by the press time, after falling the most in three weeks the previous day.

While taking clues from the Fed and the downbeat US data, Wall Street rallied and the US 10-year Treasury yields slumped the most in two weeks.

Central Banks, US jobs report eyed

Having witnessed the market reaction to the US Federal Reserve’s (Fed) dovish rate hike, Gold traders should pay attention to the monetary policy meetings of the European Central Bank (ECB) and the Bank of England (BoE) as they both could affect the US Dollar. That said, both the central banks, namely the ECB and the BoE, are likely to announce 0.50% rate lift. However, the comparative economic soundness in the bloc and more hawkish comments from the ECB policymakers in the last couple of days favor the Gold bulls. It shoudl be noted that major attention should be given to Friday’s US Jobs report. Among them, the headline Nonfarm Payrolls (NFP), expected to ease to 185K versus 223K prior, will be important to watch.

Gold price technical analysis

Gold price remains firmer inside a three-week-old megaphone trend-widening chart pattern amid the bullish signals from the Moving Average Convergence and Divergence (MACD) indicator. However, the overbought levels of the Relative Strength Index (RSI) line, placed at 14, hints at the quote’s pullback before the next leg towards the north.

Even so, the 100-Exponential Moving Average (EMA) put a floor under the Gold price near $1,912, a break of which will highlight the stated megaphone’s lower line, close to the $1,900 threshold.

In a case where the quote drops below $1,900, a one-month-old horizontal area surrounding $1,866 will be crucial to watch.

Alternatively, Gold buyers may attack the trend-widening formation’s top line, around $1,962, during the further upside, a break of which will highlight the late March 2022 top near $1,966.

Should the XAU/USD price remains firmer past $1,966, the odds of witnessing a run-up toward April 2022 high near $1,999 can’t be ruled out.

Gold price: Four-hour chart

Trend: Limited upside expected