Gold Price Forecast: XAU/USD eases amid firmer yields, United States, China statistics eyed

Gold price (XAU/USD) extends the previous day’s pullback from a five-week high as it drops to $1,901 during early Wednesday. In doing so, the bright metal remains down for the second consecutive day in the last five as the US Dollar traces upbeat Treasury bond yields to pare the week-start losses ahead of the key United States data.

Gold price ease as US Dollar traces United States Treasury yields’ rebound

US Dollar Index (DXY) picks up bids bid to refresh the intraday high near 103.75 during the two-day rebound from a one-month low, which in turn exerts downside pressure on the Gold price. In doing so, the greenback’s gauge versus the six major currencies traces the latest recovery in the United States Treasury bond yields amid further building up of the bets suggesting the Federal Reserve’s (Fed) 0.25% rate hike in March.

That said, the US 10-year Treasury bond yields rose two basis points (bps) to 3.70% by the press time, after posting the biggest daily gain in five weeks the previous day. On the same line, the two-year bond coupons also extend the previous day’s recovery from the six-month low to 4.31% at the latest.

It should be noted that the US Consumer Price Index (CPI) and CPI ex Food and Energy both matched 6.0% and 5.5% YoY market forecasts, versus 6.4% and 5.6% respective previous readings. It should be noted that the market consensus of 0.4% MoM for the CPI, versus 0.5% prior, also proved right but the CPI ex Food & Energy rose to 0.5% compared to 0.4% analysts’ estimates and prior.

“The Federal Reserve is seen raising its benchmark rate a quarter of a percentage point next week and again in May, as a government report showed U.S. inflation remained high in February, and concerns of a long-lasting banking crisis eased,” said Reuters following the US inflation data release.

Hence, hawkish Fed bets and upbeat US Treasury bond yields allow the US Dollar to remain firmer and keep the XAU/USD bears hopeful.

Easing of SVB, Signature Bank fallout risk also weighs on XAU/USD

fears from the latest fallouts of the Silicon Valley Bank (SVB) and Signature Bank also favor the Gold bears.

Recently, US Senate Banking Committee Chairman Sherrod Brown and Federal Reserve Governor Michelle Bowman ruled out chatters suggesting the grim conditions of the US banking industry.

Alternatively, Wall Street Journal (WSJ) reported that a raft of tougher capital and liquidity requirements are under review, as well as steps to beef up annual “stress tests” that assess banks’ ability to weather a hypothetical recession, according to a person familiar with the latest thinking among U.S. regulators. “The rules could target firms with between $100 billion to $250 billion in assets, which at present escape some of the toughest requirements,” per WSJ.

That said, the Gold bears seem convinced of the latest cautious optimism in the market and the US Dollar rebound. However, the key statistics from the United States and China need to validate the XAU/USD's fall.

Gold bears need validation

Although the Gold price triggered the first bearish signal in four the previous day, mixed figures of the United States Consumer Price Index (CPI) push the metal sellers to reconfirm the bounce in the US Treasury bond yields and the US Dollar.

As a result, today’s US Retail Sales for February, expected -0.3% MoM versus 3.0% prior, will be important to watch. Ahead of that, China’s February month data dump, including the Fixed Asset Investment, Industrial Production and Retail Sales could direct immediate moves in the Gold price. That said, China’s Retail Sales is expected to improve to 3.5% versus -1.8% prior while the Industrial Production growth could also rise to 2.6% from 1.3% in the previous readings. However, the Fixed Asset Investment is likely to have eased to 4.4% YoY so far in 2023, till February, versus 5.1% prior.

Gold price technical analysis

Despite successfully crossing the 200-bar Simple Moving Average (SMA), the Gold price failed to rise past a two-month-old previous support, around $1,913 by the press time.

The XAU/USD pullback also takes clues from the overbought conditions of the Relative Strength Index (RSI) line, placed at 14, as well as receding bullish signals from the Moving Average Convergence and Divergence (MACD) indicator.

It should be noted that the Gold bears have so far been struggling with the $1,900 threshold. That said, the 50% Fibonacci retracement level of the metal’s February month downturn, around $1,880, can act as an extra downside filter before directing the XAU/USD towards the 200 and 50 SMAs, respectively near $1,860 and $1,850.

On the contrary, a clear upside break of the immediate support-turned-resistance line, around $1,913, could quickly propel the Gold price towards the $1,950 hurdle that holds the key to the metal’s fresh 2023 high, currently around $1,960.

Overall, the Gold price has fewer hurdles to the north but the buyers need to re-charge their batteries for further run-up, which in turn suggests further pullback of the bullion before the next swing towards the north.

Gold price: Four-hour chart

Trend: Further downside expected