Gold Price Forecast: XAU/USD teases sellers amid sluggish yields, Federal Reserve’s favorite inflation eyed

Gold price (XAU/USD) makes rounds to $1,975, staying inside a one-week-old symmetrical triangle, as the yellow metal struggles for clear directions during early Monday. In doing so, the precious metal extends the previous weekly losses, the first in four weeks, amid cautious optimism in the market, as well as due to the downbeat United States Treasury bond yields.

Gold price eyes further weakness as yields pause previous fall

Gold price remains pressured for the second consecutive day as the United States Treasury bond yields lick their wounds at the five-month lows marked in the last week. That said, the benchmark US 10-year Treasury bond yields seesaw around 3.378% while the two-year counterpart picks up bids with mild intraday gains of around 3.797%. It’s worth noting that the yields dropped to the lowest levels since September 2022 in the last week as market players rush to bonds and gold amid fears of banking fallouts.

Easing banking woes, Fedspeak probe XAU/USD traders

During the weekend, Bloomberg’s news surrounding the Silicon Valley Bank (SVB) seemed to have contributed towards pushing back the banking turmoil. “First Citizens BancShares Inc. is in advanced talks to acquire Silicon Valley Bank after its collapse earlier this month, according to people familiar with the matter,” said Bloomberg. On the same line were comments from Minneapolis Fed President Neel Kashkari who flagged fears of US recession and tamed calls for more rate hikes from the US central bank.

It’s worth noting, however, that the mixed US data and previously hawkish Federal Reserve (Fed) officials’ comments also weigh on the Gold price. That said, Durable Goods Orders for February dropped by 1.0% versus January's fall of 5% (revised from -4.5%) and the market expectation for an increase of 0.6%. Details suggested that the figure for Durable Goods Orders ex Defense and ex Transportation were also downbeat but Nondefense Capital Goods Orders ex Aircraft came in firmer-than-expected 0.0% to 0.2%, versus 0.3% prior. Moving on, the preliminary readings of the US S&P Global PMIs for March came in firmer as the Manufacturing gauge rose to 49.3 from 47.3 in February, versus 47.0 expected, while Services PMI rose to 53.8 from 50.6 prior and 50.5 expected. With this, the S&P Global's Composite PMI increased to 53.3 from 50.1 in February, versus 50.1 market forecasts.

Elsewhere, Atlanta Fed President Raphael Bostic told NPR that it was not an easy decision to raise the policy rate while also adding that he is not expecting the economy to fall into recession. Further, St. Louis Federal Reserve President James Bullard, a policy hawk, said on Friday that the response to the bank stress was swift and appropriate, allowing the monetary policy to focus on inflation, per Reuters. The policymaker also added that the projections suggest one more rate hike that could be at the next FOMC meeting or soon after.

Geopolitical fears, and anxiety before Fed’s preferred inflation gauge weigh on Gold price

Apart from the aforementioned catalysts, Russia’s shifting of nuclear weapons near Belarus joins the cautious mood ahead of the Fed’s favorite inflation data, namely the Core Personal Consumption Expenditure (PCE) Price Index for February, also weighs on the Gold price.

“The North Atlantic Treaty Organization (NATO) NATO on Sunday criticized Vladimir Putin for what it called his ‘dangerous and irresponsible’ nuclear rhetoric, a day after the Russian president said he planned to station tactical nuclear weapons in Belarus,” per Reuters. Additionally, the Financial Times (FT) quotes one of the world’s largest shipping group  Maersk while raising fears of slower economic growth in China. Given the dragon nation’s status as one of the biggest Gold consumers, receding growth optimism weighs on XAU/USD price.

On the hand, US Core PCE Price Index is likely to ease in February and hence the latest pullback could be the preparations for an upswing after the likely softer US inflation clues.

Also read: Gold Price Forecast: Will XAU/USD rebound from the key 23.6% Fibo level?

Gold price technical analysis

Gold price seesaws inside a short-term triangle formation after snapping a three-week uptrend. It’s worth noting that the lower highs on the XAU/USD price are commensurate with the lower tops of the Relative Strength Index (RSI) line, placed at 14, which in turn suggests further downside of the quote. Adding strength to the downside bias is the recent bearish signal from the Moving Average Convergence and Divergence (MACD) indicator.

That said, a stated triangle’s lower line, close to $1,960 at the latest, restricts short-term Gold price downside. Also challenging the XAU/USD bears is the 50-bar Simple Moving Average (SMA) surrounding $1,955.

Should the Gold price breaks $1,955 support, the odds of witnessing a slump towards the 50% Fibonacci retracement of the XAU/USD upside from late February to March 20, near $1,906, can’t be ruled out.

Alternatively, an upside clearance of the aforementioned triangle’s resistance line, near $2,003 at the latest, could recall the Gold buyers. Even so, the high marked on March 10, 2022, around $2,010, may act as an extra check for the XAU/USD bulls before they aim for the previous yearly high surrounding $2,070.

Overall, the Gold price appears slipping off the bull’s radar but the bears need validation from $1,955 to retake control.

Gold price: Four-hour chart

Trend: Pullback expected