Gold Price Forecast: XAU/USD consolidates just below YTD peak ahead of US macro data

Gold price consolidates its recent gains to a fresh one-year high and seesaws between tepid gains/minor losses through the first half of the European session on Friday. The XAU/USD is currently placed around the $2,040 area and seems poised to prolong its recent upward trajectory witnessed over the past month or so.

Weaker US Dollar continues to underpin Gold price

The US Dollar (USD) languishes near its lowest level since April 2022 amid expectations that the Federal Reserve (Fed) will pause its rate-hiking cycle. This, in turn, is seen as a key factor acting as a tailwind for the US Dollar-denominated Gold price. Market participants now seem convinced that the Fed will be done with its policy tightening after hiking one last time in May in the wake of signs of easing inflationary pressures in the United States (US).

In fact, the US Producer Price Index (PPI) released on Thursday showed that US inflation at the wholesale level continued its downward slide and cooled dramatically in March. This comes on the back of the softer US Consumer Price Index (CPI) report on Wednesday and indicates that disinflation is progressing smoothly. Other data indicated that Jobless Claims rose more than expected last week, to the highest level since January 15, 2022.

Bets for an imminent pause by Federal Reserve also lend support

This was seen as a sign that labor market conditions were loosening up as higher borrowing costs continue to dampen demand in the economy, which should allow the Fed to pause after hiking one last time in May. Moreover, the March Federal Open Market Committee (FOMC) meeting minutes released on Wednesday revealed that several policymakers considered pausing interest rate increases after the failure of two regional banks.

Furthermore, Atlanta Fed president, Raphael Bostic, told Reuters this Friday that the recent developments are consistent with one more hike. This acts as a headwind for the US Treasury bond yields, which, in turn, keeps the USD bulls on the defensive and further acts as a tailwind for the non-yielding Gold price. Apart from this, a generally weaker tone around the equity markets is seen driving some haven flows towards the precious metal.

Looming recession risks further benefit the safe-haven XAU/USD

The International Monetary Fund (IMF) earlier this week trimmed its 2023 global growth outlook, citing the impact of higher interest rates. This, along with worries that the post-COVID recovery in China is losing steam, fuels recession fears and tempers investors' appetite for riskier assets. This, in turn, lends some support to traditional safe-haven assets, including the XAU/USD, and supports prospects for a further near-term appreciating move.

Traders now eye macro data from United States for a fresh impetus

That said, the slightly oversold Relatively Strength Index (RSI) on the daily chart is holding back traders from placing fresh bearish bets around the USD and acting as a headwind for the Gold price. Traders also prefer to wait on the sidelines ahead of Friday's US macro releases, monthly Retail Sales figures and the Preliminary Michigan Consumer Sentiment Index, which might influence the USD price dynamics and provide some impetus to the XAU/USD.

Gold price technical outlook

From a technical perspective, nothing seems to have changed for Gold price and the near-term bias remains tilted firmly in favour of bullish traders. Hence, some follow-through strength back towards retesting the all-time high, around the $2,070-$2,075 region, looks like a distinct possibility. On the flip side, any meaningful pullback could find decent support near the $2,020 area ahead of the $2,014-$2,013 region. The dip, however, is likely to attract fresh buyers near the $2,000 psychological mark, which should help limit losses for the XAU/USD near the $1,990-$1,980 horizontal support.

Key levels to watch