|

Gold Price Forecast: XAU/USD sits at two-month highs of $1,845 despite firmer yields

  • Gold consolidates the biggest daily gains since early November.
  • Yields rebounded following Biden’s speech supporting Powell, warning Russia and rejecting peace with China.
  • PBOC action, risk catalysts will entertain traders ahead of second-tier US data, previous support line eyed for direction

Update: Gold price is preserving the previous rally, as it sits close to fresh two-month highs of $1,844 reached in early Asia. The bullish potential in the bright metal appears intact despite the persistent strength seen around the US Treasury yields across the curve. Gold price benefited amid soaring inflation in the UK and Germany, as investors boosted its demand as an inflation hedge. Meanwhile, US President Joe Biden also called out the Fed to rein in the fastest pace of inflation in decades.

Looking ahead, the yields price action and the US dollar valuations will continue to play, with all eyes on the Eurozone final CPI release. The US weekly Jobless Claims and Existing Home Sales data could also offer some trading incentives.

Read: Gold Price Forecast: XAU/USD potential strategies in turbulent markets

Gold (XAU/USD) pares the stellar gains posted the previous day around $1,839, down 0.22% intraday during the initial Asian session as market sentiment sours.

The yellow metal jumped to the two-month high on Wednesday after the US Treasury yields stepped back from a multi-day peak and drowned the US dollar. However, the latest speech from US President Joe Biden renewed hopes of faster monetary policy normalization by the Federal Reserve (Fed), which in turn favored bond coupons and dragged the gold prices.

US President Biden highlights Chief Trade negotiator Katherine Tai’s efforts to placate Sino-American trade tussles. However, he also mentioned that the US is “'not there yet' on possible easing of tariffs on Chinese goods”. Biden also said, “China is not meeting its purchase commitments.”

Further, comments favoring Federal Reserve (Fed) Chairman Jerome Powell’s push to recalibrate the support also raised concerns over faster rate hikes and balance sheet normalization, which in turn exerted additional downside pressure on the gold prices.

Additionally, US President Biden directly warned Russia not to invade Ukraine and if they do they’ll lose access to the US dollar.

Elsewhere, uncertainty surrounding the US stimulus and the People’s Bank of China’s (PBOC) next moves also weighed on the gold prices. US President Biden signaled that the talks on the Build Back Better (BBB) stimulus is on but US Senator Joe Manchin rejects the comments. Further, the PBOC is up for conveying its Interest Rate Decision at 01:30 AM GMT with market players equally divided amid the Chinese central bank’s early signals of a rate cut and the latest comments from PBOC Deputy Governor Liu Guoqiang. The PBOC official mentioned that the central bank “will keep yuan exchange rate basically stable.”

Against this backdrop, the US 10-year Treasury yields rose 4.5 basis points (bps) to 1.87% whereas the S&P 500 Futures drop 0.15% intraday to portray the risk-off mood at the latest.

Even so, gold prices do trade beyond the short-term key resistance and hence today’s PBOC verdict, as well as risk catalysts, will be important for the watch during Asia. Following that, US Jobless Claims, Philadelphia Fed Manufacturing Survey for January and Existing Home Sales for December will entertain gold traders afterward.

Technical analysis

Gold keeps the bounce off a 50-DMA to stay above a 13-day-old descending trend line. The recovery moves gain support from firmer RSI and bullish MACD signals, suggesting additional bullish momentum on the table.

That said, the 23.6% Fibonacci retracement (Fibo.) September-November 2021 upside, near $1,840, acts as an immediate hurdle for the gold buyers before challenging multiple lows marked during the mid-November around $1,850.

Should the gold bulls keep reins past $1,850, the late 2021 peak of $1,877 will be the last line of defense for bears, a break of which will throw cards for a rally towards the $1,900 and beyond.

Alternatively, pullback moves remain elusive beyond the resistance-turned-support line from January 03, around $1,825.

Following that, the 50-DMA surrounding $1,806 will be important before directing the metal towards the 100-DMA and five-week-old support line, around $1,795-94.

If at all the gold bears smash $1,794 support, $1,782 and $1,753, comprising the monthly low and 78.6% Fibo. respectively, will be in focus.

Overall, gold buyers have an upper hand both technically, as well as fundamentally, ahead of the next week’s key FOMC.

Gold: Daily chart

Trend: Further upside expected

Additional important levels

Overview
Today last price1838.56
Today Daily Change-4.02
Today Daily Change %-0.22%
Today daily open1842.58
 
Trends
Daily SMA201813.17
Daily SMA501806.96
Daily SMA1001794.21
Daily SMA2001804.06
 
Levels
Previous Daily High1843.35
Previous Daily Low1810.32
Previous Weekly High1829.23
Previous Weekly Low1790.43
Previous Monthly High1830.39
Previous Monthly Low1753.01
Daily Fibonacci 38.2%1830.73
Daily Fibonacci 61.8%1822.94
Daily Pivot Point S11820.82
Daily Pivot Point S21799.05
Daily Pivot Point S31787.79
Daily Pivot Point R11853.85
Daily Pivot Point R21865.11
Daily Pivot Point R31886.88

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

More from Anil Panchal
Share:

Editor's Picks

EUR/USD flirts with weekly lows near 1.1770

EUR/USD now comes under further selling pressure, breaking below the 1.1800 support to challenge the area of weekly throughs near 1.1770 on Thursday. The pair’s decline comes in response to marked gains in the US Dollar amid steady geopolitical tensions. Ealier in the day, the ECB’s Lagarde delivered cautious remarks, although the currency remained apathetic.

GBP/USD threatens the 200-day SMA near 1.3440

GBP/USD rapidly leaves behind Wednesday’s strong advance, coming under heavy pressure and retesting the 1.3440 zone, where the critical 200-day SMA is located. Cable’s deep pullback follows the strong gains in the Greenback, while investors continue to pencil in a potential BoE rate cut in March.

Gold trims gains, slips back to around $5,170

Gold is now facing some downside pressure, hovering around the $5,170 region on Thursday. The yellow metal surrenders part of its earlier gains on the back of the resurgence of the buying interest in the Greenback. In the meantime, geopolitical tensions in the Middle East continue to limit the downside potential for now.

Stellar: Relief bounce fades as bearish undertone persists

Stellar is trading around $0.16 at the time of writing on Thursday after rebounding more than 8% in the previous day. Derivatives data paints a negative picture as XLM’s short bets hit a monthly high while Open Interest continues to decline.

Changing the game: International implications of recent tariff developments

The Supreme Court ruling on International Emergency Economic Powers Act (IEEPA) tariffs provides limited relief for the rest of the world, with weighted average tariff rates modestly lower.

Bitcoin steadies as traders eye US–Iran talks

Bitcoin (BTC) price is stabilizing around $68,000 at the time of writing on Thursday after a 6.2% relief rally the previous day amid a broader downward trend.