Gold Price Forecast: XAU/USD eases from near $1,860 despite weaker Treasury bond yields

Gold price is retreating from over two-week highs of $1,858 in the early European session. Gold price has stalled its upbeat momentum even as the United States Dollar (USD) resumes its decline amid a positive risk tone.  The focus this week remains the US Federal Reserve (Fed) Chairman Jerome Powell’s testimony and the all-important US Nonfarm Payrolls data.  

It's all about Federal Reserve expectations

Powell is due to testify on the semi-annual monetary policy report released on Friday and markets are anticipating some hints on the policy outlook. Therefore, they are resorting to repositioning, gearing up for a significant market reaction to the Fed Chief’s testimony. The sustained pullback in the US Treasury bond yields is also unable to revive the Gold buyers.

Meanwhile, markets are pricing roughly a 30% probability of a 50 basis points (bps) rate hike in the March meeting. Friday’s US ISM Services PMI eased slightly to 55.1 in February, The critical US ISM Services Price Paid Index bettered expectations, coming in at 65.6 vs. 64.5 expected. Upbeat figures indicated elevated inflationary pressure, supporting the case for bigger Federal Reserve rate hikes.

Despite the hawkish expectations, the US Dollar failed to capitalize on Friday, as the end-of-the-week flows came into play and weighed heavily on the greenback. As a result, Gold price rallied hard to hit the highest level in two weeks above $1,850.

Ahead of the key event risks later in the week, Gold traders now await the United States Factory Orders data due later in the North American session for fresh trading impetus. In absence of top-tier US economic data, Gold price will take cues from the broad market sentiment and the dynamics of the US Dollar alongside the Treasury bond yields.

Gold price technical analysis: Daily chart

On Friday, Gold price yielded a daily closing above the bearish 21-Daily Moving Average (DMA) at $1,844. Therefore, Gold bulls flexed their muscles early Monday before changing course, following the downtick in the 14-day Relative Strength Index (RSI). The momentum indicators is now threatening the 50.00 level again, which could potentially help extend the corrective decline in Gold price. If that materializes, Gold price could retreat further to test the 21 DMA resistance-turned-support. A clear downside break of the latter will call for a test of Friday’s low at $1,835.

Altenatively, if buyers manage to fight back control, Gold price rally could resume, prodding the mildly bullish 50 DMA resistance at $1,870. Ahead of that level, the $1,858-$1,860 supply zone could be a tough nut to crack for Gold optimists.