Gold Price Forecast: XAU/USD bulls run out of steam amid mixed markets, rising wedge in focus


  • Gold Price remains mildly bid, mostly sidelined, during the sixth consecutive week of uptrend.
  • Market’s cautious mood ahead of the next week’s Federal Reserve (Fed) meeting probes Gold buyers.
  • United States Purchasing Managers Index for January failed to recall US Dollar buyers, allowing XAU/USD to remain firmer.
  • US GDP could offer the last key signal ahead of Fed to Gold traders.

Gold price (XAU/USD) seesaws around $1,938 as bulls take a breather inside a bearish chart pattern during early Wednesday. In doing so, the bright metal depicts the market’s mixed feelings amid downbeat data from the United States, as well as the cautious mood ahead of the next week’s Federal Reserve (Fed) meeting. Even so, the US Dollar weakness and optimism surrounding Europe, as well as China, appears to favor the XAU/USD bulls.

Lack of clarity in the market probes Gold buyers

Although the Gold buyers keep the reins for the sixth consecutive week, the mixed signals from global markets and the Federal Reserve’s (Fed) silence period ahead of next week’s Federal Open Market Committee (FOMC) seem to restrict the XAU/USD moves. Also challenging the Gold traders could be the one-week-long holidays in China due to the Lunar New Year (LNY) celebrations. It’s worth noting that the European Central Bank (ECB) officials also sneak into the pre-monetary policy blackout starting today and adds barriers to the Gold price moves. While portraying the sentiment, the US 10-year Treasury yields dropped five basis points (bps) to 3.455% but Wall Street closed mixed.

Downbeat US Dollar favors XAU/USD bulls

Despite the mixed sentiment, the US Dollar weakness favors the Gold buyers due to the inverse relationship between the XAU/USD and the greenback. It’s worth noting that the US Dollar Index (DXY) remains indecisive near 101.90 after printing a two-week downtrend in the last. In doing so, the greenback’s gauge versus the six major currencies takes clues from the market’s bearish bias for the next week’s Fed meeting, as well as highlights the downbeat US data.

That said, preliminary readings of the US S&P Global Manufacturing PMI for January rose past 46.2 market forecast and 46.1 market expectations with 46.8 figure while the Services PMI followed the suit with the 46.6 figure for the said month, versus 44.5 forecast and 44.7 prior. That said, the S&P Global Composite PMI for January increased to 46.6 from 45.0 prior and the 44.7 consensus, marking the seventh consecutive read below 50. 

Following the US data, the US Dollar Index (DXY) managed to rise for a brief time before closing in the red. The reason could be linked to the comments from Chief Business Economist at S&P Global Chris Williamson who said, “The US economy has started 2023 on a disappointingly soft note, with business activity contracting sharply again in January."

Considering the downbeat US data, markets widely anticipate a 0.25% Fed rate hike and the policy pivot in the next week. As a result, the Gold buyers appear pricing in the expected outcome.

Europe, China-linked optimism also strengthens Gold price

Even if China is off the market for the Lunar New Year celebrations, the positive vibes emanating from the reopening of the world’s largest commodity user keep Gold buyers hopeful. Also underpinning the XAU/USD upside could be the expectations of strong festive demand. It’s worth noting that the recent challenges to the US-China ties due to the alleged Chinese connection to the Russian war seem to probe the optimism.

Elsewhere, the latest activity data from Europe appear to help the traders optimistic about the old continent. That said, Eurozone S&P Global Manufacturing PMI crossed the 48.5 market forecasts and 47.8 previous readouts with 48.8 figure for January. Further, the Services PMI also impressed Euro bulls with 50.7 mark versus 50.2 expected 49.8 prior. With this, the Composite PMI for the bloc increased to 50.2 from 49.3 previous readings and 49.8 market forecasts. Following the data releases, Chris Williamson, Chief Business Economist at S&P Global said, “A steadying of the Eurozone economy at the start of the years adds to evidence that the region might escape recession.”

US Gross Domestic Product is the key

While the United States Durable Goods Orders and the second-tier employment data could also entertain the Gold buyers, major attention will be given to the first readings of the US Gross Domestic Product (GDP) for the fourth quarter (Q4). The reason appears logical due to the next week’s Federal Reserve (Fed) meeting, as well as the talks of the US recession. Forecasts suggest the world’s biggest economy eases with 2.8% annualized growth.

Also read: US Gross Domestic Product Preview: Three reasons to expect a US Dollar-boosting outcome

Gold price technical analysis

Despite the mildly bid performance of late, the Gold price stays inside a one-week-old rising wedge bearish chart pattern. The bearish bias also gains support from the Relative Strength Index (RSI) line, placed at 14, as well as the mixed signals from the Moving Average Convergence and Divergence (MACD) indicator.

As a result, the XAU/USD is likely to grind higher unless staying between $1,944 and $1,916 levels. However, the oscillators, namely the RSI and MACD, tease the bears and hence a downside break of $1,916 could gain more response than the otherwise conditions.

In that case, a one-month-old ascending trend line and the 100-Simple Moving Average (SMA), respectively near $1,896 and $1,890, will be crucial to watch before expecting the Gold price downside toward the theoretical target of $1,870.

On the flip side, a successful break of $1,944 will defy the bearish chart pattern and could propel the XAU/USD toward March 2022 peak surrounding $1,966.

Should the Gold buyers keep the reins past $1,966, the odds of witnessing the $2,000 on the chart can’t be ruled out.

Gold price: Four-hour chart

Trend: Further weakness expected

Additional important levels

Overview
Today last price 1937.39
Today Daily Change 6.13
Today Daily Change % 0.32%
Today daily open 1931.26
 
Trends
Daily SMA20 1871.86
Daily SMA50 1815.68
Daily SMA100 1746.33
Daily SMA200 1775.73
 
Levels
Previous Daily High 1935.62
Previous Daily Low 1911.45
Previous Weekly High 1937.57
Previous Weekly Low 1896.63
Previous Monthly High 1833.38
Previous Monthly Low 1765.89
Daily Fibonacci 38.2% 1926.39
Daily Fibonacci 61.8% 1920.68
Daily Pivot Point S1 1916.6
Daily Pivot Point S2 1901.94
Daily Pivot Point S3 1892.43
Daily Pivot Point R1 1940.77
Daily Pivot Point R2 1950.28
Daily Pivot Point R3 1964.94

 

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD defends 0.6400 after Chinese data dump

AUD/USD defends 0.6400 after Chinese data dump

AUD/USD has found fresh buyers near 0.6400, hanging near YTD lows after strong China's Q1 GDP data. However, the further upside appears elusive amid weak Chinese activity data and sustained US Dollar demand. Focus shifts to US data, Fedspeak. 

AUD/USD News

USD/JPY stands tall near multi-decade high near 154.50

USD/JPY stands tall near multi-decade high near 154.50

USD/JPY keeps its range near multi-decade highs of 154.45 in the Asian session on Tuesday. The hawkish Fed expectations overshadow the BoJ's uncertain rate outlook and underpin the US Dollar at the Japanese Yen's expense. The pair stands resilient to the Japanese verbal intervention. 

USD/JPY News

Gold: Buyers take a breather below $2,400 amid easing geopolitical tensions

Gold: Buyers take a breather below $2,400 amid easing geopolitical tensions

Gold price is catching a breath below $2,400 in Asian trading on Tuesday, having risen over 1% in the US last session even on a solid US Retail Sales report, which powered the US Dollar through the roof. Easing Middle East geopolitical tensions and strong Chinese data could cap Gold's upside. 

Gold News

SOL primed for a breakout as it completes a rounding bottom pattern

SOL primed for a breakout as it completes a rounding bottom pattern

Solana price has conformed to the broader market crash, following in the steps of Bitcoin price that remains in the red below the $65,000 threshold. For SOL, however, the sensational altcoin could have a big move in store.

Read more

Israel-Iran military conflict views and takeaways

Israel-Iran military conflict views and takeaways

Iran's retaliatory strike on Israel is an escalation of Middle East tensions, but not necessarily a pre-cursor to broader regional conflict. Events over the past few weeks in the Middle East, more specifically this past weekend, reinforce that the global geopolitical landscape remains tense.

Read more

Forex MAJORS

Cryptocurrencies

Signatures