Gold Price Forecast: XAU/USD dwindles around $1940, retraced as traders eye US Q4 GDP

Gold snaps two days of gains and retreats from weekly highs reached around $1942.51, stumbles beneath the $1940 figure amid a risk-off impulse that weighed on safe-haven assets, including the US Dollar (USD). US Treasury bond yields are also edging lower in a gold move that appears to be driven by profit-taking. At the time of writing, the XAU/USD exchanges hands at $1,933.00

Sentiment remains sour, weighed by earnings and US companies lowering forecasts

Wall Street extends its losses at the open, following a warning that Microsoft sales in cloud services might slow down. Other big tech companies are feeling the pain of higher interest rates in the United States (US) as the US Federal Reserve (Fed) tightened 400 basis points, its monetary policy, since March 2022, to curb high inflationary pressures. Nevertheless, the next week’s monetary policy decision, with financial markets widely expecting a 25 bps rate hike to the Federal Funds rate (FFR), could continue to weigh on the greenback.

The US Dollar Index (DXY), a gauge for measurement of the buck’s value vs. a basket of peers, losses 0.10% down at 101.828, undermined by a gloomy economic outlook in the US. The US 10-year Treasury bond yield eases one and a half bps and yields 3.44%.

The World Bank and Swiss Federal Office for Customs and Border Security reported Swiss exports of gold to China surged in 2022, at 478 metric tons. That’s up from 274 tons in 2021.

In the meantime, the US economic docket for Thursday would be busy, led by the Advance in Gross Domestic Product (GDP) for Q4, expected at 2.6%. Further, Durable Good Orders are expected to recover to 2.5%, compared to last month’s -2.1% plunge. Unemployment claims for the last week would also be updated, along with the US Federal Reserve Core PCE inflation reading.

Gold Technical Analysis

Technically speaking, XAU/USD is consolidating around the $1,910-$1,940 range during the last three trading sessions, unable to crack the $1,950 mark. Of note, the Relative Strength Index (RSI) continues at overbought territory, while the Rate of Change (RoC) retraces from its peak of the week, suggesting that buying pressure is waning. Hence, the Gold price might pull back in the near term before resuming its uptrend.

XAU/USD key support levels are $1,900, followed by the $1,896.74 January 18 daily low. Break below will expose the 20-day Exponential Moving Average (EMA) at $1,889.22. On the other hand, for an uptrend continuation, XAU/USD needs to reclaim $1,950 as it aims to rally toward $2,000.