|

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

GBP/USD declines as market caution lifts US Dollar

GBP/USD extends its gains for the second successive day, trading around 1.3200 during the Asian hours on Wednesday. The currency pair depreciated as the US Dollar gained momentum, driven by a combination of robust domestic economic data and a complex, mixed geopolitical landscape.

EUR/USD hits one-year low, eyes 1.1350 as bullish USD offsets oversold RSI

The EUR/USD pair drifts lower for the third straight day – also marking the fifth day of a negative move in the previous six – and drops to over a one-year low during the Asian session on Wednesday. Spot prices currently trade around the 1.1365 area, down nearly 0.15% for the day, and seem vulnerable to slide further amid a bullish US Dollar.

$4,050: Gold dives to fresh two-week low as Fed rate hike bets boost US Dollar

Gold drifts lower for the second straight day – also marking the fifth day of a negative move in the previous six – and drops to a nearly two-week low during the Asian session on Wednesday. Despite easing inflationary concerns in the face of the recent fall in Crude Oil prices, traders have been pricing in a greater chance of a rate hike by the US Federal Reserve. 

Dogecoin tests a key make-or-break point amid waning retail support

Dogecoin trades below $0.08000 maintaining a steady decline for the seventh straight week. The meme coin is losing its retail strength as DOGE futures Open Interest drops 10% in 24 hours, while institutional demand remains muted with zero inflows so far this week.

"Rearranging the deckchairs on the Titanic": UK's fiscal crisis outlasts another Prime Minister

Keir Starmer's resignation as the UK Prime Minister comes ten years after the Brexit referendum vote, a coincidence that financial markets have been quick to note. The British Pound trades around 1.3220 against the US Dollar on Thursday.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.