Gold Price Forecast: XAU/USD stays on bumpy bearish road on mixed Federal Reserve talks

Gold price (XAU/USD) stays defensive around $1,870, after the last two days’ failed attempt to rebound from $1,860, as market sentiment stays sluggish amid mixed signals from the Federal Reserve and the geopolitical front. Adding confusion to the metal traders’ minds could be the lack of major data/events. Even so, the bullion remains on the bear’s radar as the United States Treasury bond yields remain firmer.

Federal Reserve officials keep Gold bears hopeful

The Federal Reserve (Fed) officials managed to praise the recent upbeat data from the United States even as their tone appears mixed, which in turn exerts downside pressure on the Gold price. The same joins sluggish market sentiment and the previous week’s dovish Fed hike to probe the XAU/USD bears.

On Tuesday, Minneapolis Federal Reserve (Fed) President Neel Kashkari told CNN, "We may have to hold rates at a higher level for longer," while adding that he is not forecasting a recession.

Following that, Federal Reserve Chairman Jerome Powell said, “Expect 2023 to be a year of significant declines in inflation,” while also adding that if data were to continue to come in stronger than expected, would certainly raise rates more.

United States-China tension also weighs on XAU/USD

Apart from the Fed talks, the latest tension between the United States and China also please the Gold bears. Although US President Joe Biden tried placating the fears of another round of Sino-American tussles by saying, “The balloon incident does not weaken US-China relations,” China’s rejection of the Pentagon request keep the geopolitical tension high and tease XAU/USD sellers. “China has declined a US request for a phone call between U.S. Defense Secretary Lloyd Austin and Chinese Defense Minister Wei Fenghe,” a Pentagon spokesman said on Tuesday reported Reuters.

Treasury yields cheer easing fears of US recession and tease Gold sellers

It’s worth noting that the United States Treasury bond yields remain firmer, even if the US Dollar retreats of late. The reason could be linked to the comments from US Treasury Secretary Janet Yellen and President Joe Biden which pushed back the US recession concerns, as well as slightly hawkish Federal Reserve comments. Also underpinning the US bond yields, as well as weighing on the Gold price, are mixed talks from the rest of the world's central bank officials.

That said, the US 10-year Treasury bond yields print a three-day uptrend to refresh a one-month high of around 3.68% while the US Dollar Index (DXY) eases from its monthly peak to 103.35 as of late.

Central banks favor Gold buyers

It’s worth noting that the global central banks seek solace in Gold buying, despite the aforementioned negative catalysts. As a result, the latest revised World Gold Council (WGC) update states, “Following a correction to the historical data from 1950-1969, Gold Demand Trends has been amended to report that 2022 was a record year for annual central bank buying. Previously, 2022 had been reported as the second-highest year on record.”

US President Joe Biden’s speech eyed

Although the aforementioned mixed signals and firmer yields weigh on Gold prices, the traders lack clear directions and hence today’s State of the Union (SOTU) speech from United States President Joe Biden will be crucial for immediate direction. Ahead of the 02:00 AM GMT release, Reuters said, “US President Joe Biden will face Republicans who question his legitimacy and a public concerned about the country's direction in Tuesday's State of the Union speech that is expected to serve as a blueprint for a 2024 re-election bid.”

US President Biden’s SOTU will be closely observed for the Sino-American tussles and could weigh on the Gold price in the case that appears tough.

Gold price technical analysis

Gold’s failure to cross the 200-bar Simple Moving Average (SMA), despite bouncing off $1,860, portrays the underlying momentum weakness for the commodity.

That said, the gradual rebound in the Relative Strength Index (RSI), placed at 14, joins mildly bullish signals from the Moving Average Convergence and Divergence (MACD) indicator to challenge the XAU/USD bears.

As a result, the metal sellers seem to wait for a clear break of $1,860 to confirm further downside of the Gold price.

Even so, an upward-sloping support line from mid-December 2022, close to $1,850 at the latest, may act as an extra filter toward the south before directing the XAU/USD bears toward the $1,800 threshold. Though, seven-week-old horizontal support near $1,825 may act as an intermediate halt.

Meanwhile, the Gold price rebound needs validation from the 200-SMA, around $1,883 by the press time, as well as the $1,900 to recall the buyers.

Following that, the $1,930 and the $1,945 levels may probe the XAU/USD bulls before directing them to the recent high near $1,960 and a three-week-old ascending resistance line, around $1,970 as we write.

Overall, the Gold price remains on the bear’s radar even as the road toward the south appears bumpy.

Gold price: Four-hour chart

Trend: Further weakness expected