Gold Price Forecast: XAU/USD rebounds on China data, International Monetary Fund growth projections

Gold price (XAU/USD) licks its wounds around $1,925 after a three-day downtrend as market sentiment improves during early Tuesday. The reason could be linked to China’s official activity data and the upbeat growth forecasts from the International Monetary Fund (IMF). Adding strength to the optimism are the Covid headlines. However, the anxiety ahead of top-tier central bank meetings and the key earnings report probe the Gold buyers of late.

COVID-19 headlines probe Gold bears

A cautious mood ahead of this week’s bumper data and central bank meetings joined the upbeat United States Dallas Fed manufacturing index for January, which marked the highest reading since May 2022, to favor the Gold bears the previous day. However, risk-positive headlines surrounding the Coronavirus-led restrictions from China and the US seemed to have probed the XAU/USD sellers afterwards.

News suggesting US President Joe Biden’s administration’s readiness to revoke the Covid-led emergencies from May 11 appeared to have favored the risk-on profile of late. On Monday, China’s Center for Disease Control and Prevention (CDC) said, reported by Reuters, “China's current wave of COVID-19 infections is nearing an end, and there was no significant rebound in cases during the Lunar New Year holiday.”

China Purchasing Managers’ Indexes renew XAU/USD buying

Having heard the positive updates over the Covid-linked restrictions, the upbeat prints of China’s NBS Purchasing Managers’ Indexes (PMI) for January added strength to the Gold price recovery. That said, China’s NBS Manufacturing PMI rose to 50.1 versus 49.7 market forecasts and 47.0 prior, whereas Non-Manufacturing PMI also came in upbeat with a 54.4 figure compared to 51.0 expected and 41.6 previous readings.

International Monetary Fund’s growth forecasts add strength to Gold price

The International Monetary Fund (IMF) recently raised its global growth estimates, saying that the emerging markets slowdown bottomed out in 2022. The global lender also stated that estimates come with the backdrop of a slight increase in the 2023 global growth outlook helped by "surprisingly resilient" demand in the United States and Europe, an easing of energy costs and the reopening of China's economy after Beijing abandoned its strict COVID-19 restrictions.

Given upbeat growth forecasts pushing market players toward riskier assets, Gold could be the first to cheer.

Second-tier United States data to probe US Dollar bulls amid sluggish yields

In addition to the aforementioned risk-positive catalysts, the lack of hawkish concerns in the market also weighs on the United States Treasury bond yields and the US Dollar, which in turn favor Gold buyers. That said, the US 10-year Treasury yields struggle to extend a three-day uptrend near 3.54% while the US Dollar Index (DXY) retreats to 102.20 at the latest.

The US fourth-quarter (Q4) Employment Cost Index (ECI) and the Conference Board’s Consumer Confidence gauge for January will be eyed for immediate directions. As per the market consensus, the US Consumer sentiment gauge may improve, but a likely softer print of the US ECI, to 1.1% from 1.2%, could strengthen the dovish bias surrounding Fed and can recall the XAU/USD buyers.

However, it should be noted that the cautious mood ahead of the earnings reports from the equity heavyweights like Amazon, Alphabet, Apple and Meta could also challenge the market’s optimism and the Gold price.

Gold price technical analysis

Gold price recovers from a one-month-old ascending support line while teasing the XAU/USD buyers amid the steady Relative Strength Index (RSI).

However, a clear downside break of the 50-bar Simple Moving Average (SMA) joins the bearish signals from the Moving Average Convergence and Divergence (MACD) indicator to keep the Gold sellers hopeful.

As a result, the metal’s rebound remains elusive unless it remains below the 50-SMA, around $1,930 by the press time.

Following that, multiple swing highs marked since Thursday could probe the Gold buyers around $1,935 before highlighting the monthly peak of $1,949 and the $1,950 round figure.

It’s worth noting that an upward-sloping resistance line from January 16, close to $1,958 by the press time, appears to be the last defense for the XAU/USD bears.

Alternatively, a downside break of the aforementioned support line, close to $1,920, could trigger a quick fall of the Gold price towards the $1,900 threshold.

However, the metal’s sustained weakness past $1,900 will make it vulnerable to testing the 200-SMA, near $1,863 at the latest.

Gold price: Four-hour chart

Trend: Limited recovery expected