Gold Price Forecast: XAU/USD steadies below $1,850 amid risk aversion, pre-Fed anxiety

Update: Gold (XAU/USD) prices remain pressured around intraday low surrounding $1,836, mostly inactive during early Friday.

The yellow metal struggles for a clear direction after stepping back from the key resistance line the previous day. In doing so, the gold stays divided between the hawkish Fed expectations and the downbeat US Treasury yields, as well as the US Dollar Index (DXY).

That said, the greenback gauge drops 0.06% intraday while the US 10-year Treasury yields decline for the third consecutive day to recently around 1.77%, down 5.5 basis points (bps). Also portraying the risk-off mood is the 0.6% intraday loss of the S&P 500 Futures and downbeat performance of Asia-Pacific equities.

It’s worth observing that a lack of major data/events join the metal’s pullback to cross the key resistance may trigger the quote’s pullback move amid cautious sentiment ahead of the next week’s Federal Open Market Committee (FOMC).

End of update.

Gold (XAU/USD) extends late  Thursday’s pullback from a two-month high, refreshes intraday low around $1,838 during Friday’s Asian session. In doing so, the yellow metal bears the burden of the risk-off mood even as the US Treasury yields stay on the back foot.

The metal’s pullback from the year-long resistance line could be linked to the market’s fears over the US Federal Reserve’s (Fed) next moves amid recently mixed data and the policymaker’s readiness to act.

That said, the US Jobless Claims jumped to the highest since late October and the Philadelphia Fed Manufacturing Survey details also improved for January. However, US Treasury Secretary Yellen recently said in the CNBC interview, “Inflation rose by more than most economists, including me, expected and of course, it's our responsibility with the Fed to address that. And we will.”

While portraying the mood, the US 10-year Treasury yields posted a second consecutive daily loss, down four basis points to 1.79% at the latest, whereas the S&P 500 Future dropped 0.30% intraday by the press time.

It’s worth observing that news from the South China Morning Post (SCMP) relating to the Sino-American ties should have helped the market sentiment but did not. SCMP signaled that China’s Yang Jiechi and US national security adviser Jake Sullivan are up for a crunch meeting but no date was indicated.

The yellow metal poked one-year-old resistance line as the US dollar tracked Treasury yields. However, the recent pre-Fed caution seems to weigh on gold prices, which in turn may continue amid a lack of major data/events and the metal’s failure to cross the key hurdle to the north.

Technical analysis

Having crossed a three-week-old resistance line on Wednesday, now support around $1,826, gold retreats from a year-long downward sloping trend line, around $1,850, amid firmer RSI and bullish MACD signals.

Though, $1,850 isn’t the only key to open the door for gold buyers as 61.8% Fibonacci retracement (Fibo.) of January-March 2021 fall, near $1,852, acts as a validation point to the rally targeting late 2021 peak of $1,877.

Following that, the 78.6% Fibo. level surrounding $1,900 and June 2021 peak of $1,916-17 will be in focus.

Alternatively, pullback moves below $1,826 will drag the quote towards the $1,800 threshold but an ascending support line from mid-December, close to $1,798, will test the gold sellers afterward.

Even if the gold prices fall below $1,798, a five-month-old support line close to $1,791-92 will be crucial as a clear break of which won’t hesitate to welcome gold bears.

To sum up, gold buyers approach key resistance that could give buyers a free hand.

Gold: Daily chart

Trend: Further upside expected