Gold Price Forecast: XAU/USD surges in late New York trade to print $1,941.29 high

Update: There has been a surge in the price of gold in the late US session. It is now 0.6% higher and has reached a new high of $1,941.29. The US dollar has suffered a marginal blow late in the day without anything fundamental crossing the news wires. DXY index slid from 97.953 and now sits at 97.764.

Testifying before Congress, Fed Chair Powell said he would be recommending and supporting a 25bp increase at the March meeting. He has not completely ruled out a 50bp lift but the markets are leaning more towards the former. However, Powell said a 50bp may be required to curb inflation, showing his concerns for the recent lift in energy prices. Although, he favours a steady approach as the risks related to the Russian invasion of Ukraine are factored in.

''In turn, the market continues to price-out a 50bp Fed hike for March, but implications for the subsequent rate path are less clear,'' analysts at TD Securities explained. ''Geopolitical tensions would be unlikely to derail the Fed's plans to hike and to withdraw liquidity using quantitative tightening if inflation expectations show additional signs of de-anchoring. However, if the shock simultaneously dents consumer sentiment, the Fed will have to walk a tight-rope between its unemployment and inflation targets.''

End of update

The gold price is stalling on the bid. At $1,929, the precious metal is barely in the green by 0.02% ranging between $1,922.11 the low and $1,938.83.  

A "wait and see" theme has formed in financial markets as investors search for the next catalyst from developments in the Ukraine crisis and economics. Russian and Ukrainian negotiators meet in Belarus today for peace talks as the war enters its second week.

US stock indexes are mixed with just modest changes early on Thursday. The US dollar, however, has been supported by comments from Federal Reserve Chairman Jerome Powell. Powell gave his insights for a second day of testimony to Congress, after saying on Wednesday that he would support a 25-basis-point hike at the Fed's March 15-16 meeting.

Powell repeated comments that he made before the House Financial Services Committee on Wednesday, noting uncertainty due to the invasion of Ukraine but insisting that inflation needed to be contained. He said that the FOMC will act cautiously and be nimble in reducing policy accommodation.

The tone was more dovish than the previous commentary, however,  he also said he would be willing to raise interest rates at a faster pace than 25 basis points in subsequent meetings if inflation does not slow as expected. It is worth noting that there have been calls for at least 100 basis points of tightening by July 1. This would mean that at least one 50-basis point hike will come between then and now.

NFP in focus

The US jobs data will be under the microscope in this regard. On Friday, the Nonfarm Payrolls will be key. Earlier Thursday, data showed the number of Americans filing new claims for unemployment benefits dropped to their lowest level this year last week. For Friday's data, analysts are anticipating another month of solid job growth.

Employment likely continued to recover in February following an unexpectedly strong Jan report—despite the Omicron-led surge in COVID cases, analysts at TD Securities explained.

''We expect some of that boost to fizzle, though to still firm job growth pace. Seasonal adjustments were a factor last month and they will likely play a role again in Feb. We expect wage growth to slow to a still strong 0.5% m/m pace.''

Meanwhile, the analysts at TDS also said ''the war in Ukraine has significant and obvious implications for commodities prices, which could lead to a more persistent inflationary shock.''

For the time being, direct implications of the conflict as a growth shock are more limited in the US, given that direct trade flows are marginal. But indirect implications are more relevant as ongoing disruptions to supply chains are likely to have a spillover effect, while inflation is also likely to act as a tax on consumers.''

Gold technical analysis

The price has pulled back into a 50% mean reversion where it meets old resistance turning to support.