Gold Price Forecast: XAU/USD stays firmer on easing hawkish Federal Reserve bets, optimism surrounding China

Gold price (XAU/USD) grinds higher towards $1,800 after posting the first weekly gain in three. In doing so, the yellow metal begins the week’s trading, following Monday’s off in multiple markets, amid the holiday season. Even so, the recent mixed United States data and risk-positive headlines from China keep XAU/USD buyers hopeful.

Gold cheers mostly softer United States data

Recently downbeat data from the United States seemed to have offered a bid to the Gold price, mainly via the softer US Dollar.

On Friday, the US Core Personal Consumption Expenditures (PCE) Price Index, mostly known as the Fed’s favorite inflation gauge, matched 4.7% YoY forecasts for November versus 5.0% prior. Further, the Durable Goods Orders for the said month marked a contraction of 2.1% compared to -0.6% expected and 0.7% previous readings. More importantly, the Nondefense Capital Goods Orders ex Aircraft marked improvement of 0.2% compared to 0.0% expected and 0.3% revised down prior.           

On the same line, the Federal Reserve (Fed) Bank of Atlanta’s GDPNow tracker rose to show +3.7% annualized growth for the fourth quarter (Q4) versus +2.7% previous estimates.

Previously, the US economy expanded at an annualized rate of 3.2% in the third quarter (Q3), per the final readings of the Gross Domestic Product (GDP), versus 2.9% previous estimates. Further, the Personal Consumption Expenditure (PCE) Prices match 4.3% QoQ estimations during Q3 2022 whereas the Core PCE improved to 4.7% QoQ versus 4.6% market forecasts.

Following the data, the US Dollar retreated as the same suggests the much-awaited easiness in the world’s largest economy’s inflation conditions, which in turn requires a less-hawkish approach from the Fed and the same could propel the Gold price.

China Covid announcements favor XAU/USD bulls

Considering China’s status as the world’s largest metal consumer, Gold price cheers any positive announcements from Beijing. Recently, the dragon nation is on the run to ease the Covid restrictions and the same has favored prices of XAU/USD.

On Monday, China’s National Health Commission (NHC) said that China will stop requiring inbound travelers to go into quarantine starting from January 8. The news also stated that China's management of COVID-19 will also be downgraded to the less strict Category B from the current top-level Category A.

Geopolitics probe Gold buyers

Although the easing hawkish bias on the Federal Reserve (Fed) and optimism surrounding China favor Gold buyers, the looming geopolitical concerns surrounding China and Russia challenge the metal’s immediate upside.

Recently, Russian Foreign Minister Sergei Lavrov was quoted saying that Moscow's proposals for "demilitarisation" and "denazification" of Ukraine are well known to Kyiv and it is up to Ukrainian authorities to fulfill them.

During the weekend, the Ukrainian Foreign Ministry mentioned that Ukraine calls for Russia's removal from United Nations. Also highlighting the geopolitical tension was a drone from North Korea that briefly flew over South Korea and couldn’t be shot down by Seoul, as per Yonhap news. Additionally, the Chinese military conducted “strike drills” around Taiwan’s sea and air space in reaction to the provocation by the US-Taiwan ties.

A quiet week to let the Gold bulls dominate

Considering the lack of major data/events up for publishing during the rest of the week, due to the holiday season, the Gold price is likely t continue extending the latest run-up. It’s worth noting, however, that China’s official Purchasing Managers’ Indexes (PMIs) for December, up for publishing on Saturday, will be important to watch for fresh impulse. Additionally, the risk noises surrounding Ukraine and China may also entertain the XAU/USD traders.

Gold price technical analysis

Gold price defends Friday’s bounce off a one-month-old ascending support line, as well as stays beyond the 100-Exponential Moving Average (EMA), as bulls eye the consecutive second monthly gain.

The receding bearish bias of the Moving Average Convergence and Divergence (MACD) indicator also keeps the XAU/USD buyers hopeful.

That said, the $1,800 threshold precedes the early December swing high, near $1,810, to restrict the short-term upside of the Gold price.

Following that, a two-week-old horizontal resistance region near $1,813 and the double tops near $1,825 could challenge the XAU/USD upside.

On the downside, an upward-sloping support line from late November, around $1,792 by the press time, restricts immediate declines of the yellow metal.

Also acting as the short-term key support is the 100-EMA and an ascending trend line support from November 28, respectively around $1,790 and $1,788.

In a case where prices drop below $1,788, the mid-month swing low of around $1,774 and the monthly low of $1,765 will gain the Gold bear’s attention.

Overall, the Gold price is likely to remain firmer even as the upside room appears limited.

Gold price: Four-hour chart

Trend: Further upside expected