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Gold Price Forecast: XAU/USD trades above $2,000 ahead of US CPI/FOMC minutes

  • Gold price climbs to a fresh weekly high on Wednesday, though lacks follow-through.
  • A softer US Dollar lends some support to the XAU/USD amid looming recession risks.
  • The upside remains capped as traders await the US CPI report and the FOMC minutes.

Gold price scales higher for the second successive day and touches a fresh weekly high, around the $2,021 area on Wednesday, albeit lacks follow-through. The XAU/USD retreats to the $2,010 region during the first half of the European session as traders keenly await the release of the consumer inflation figures from the United States (US) and the Federal Reserve's (Fed) latest policy meeting minutes.

Focus remains on US consumer inflation and FOMC minutes

The crucial US Consumer Price Index (CPI) report will play a key role in influencing market expectations about the next policy move by the Fed. Furthermore, the Fed minutes will provide insight into how policymakers evaluated the need for higher rates despite the turmoil in the banking sector. This, in turn, should help investors to determine the near-term trajectory for the US Dollar (USD) and provide a fresh directional impetus to the non-yielding Gold price.

Recession fears act as a tailwind for Gold price

In the meantime, worries about a deeper global economic downturn, along with heightened US-China tensions over Taiwan, lend some support to the safe-haven XAU/USD. In fact, the International Monetary Fund (IMF) on Tuesday trimmed its 2023 global growth outlook, citing the impact of higher interest rates and fueling recession fears. Furthermore, Minneapolis Fed President Neel Kashkari warned that tightening credit conditions could lead to a recession.

Bets for another 25 bps Fed rate hikes cap the XAU/USD

The upside for the Gold price, however, remains capped amid the prospects for further policy tightening by the Fed. The markets are currently pricing in a greater chance of another 25 basis points (bps) rate hike at the next Federal Open Market Committee (FOMC) meeting in May. The bets were reaffirmed by hawkish comments by Philadelphia Fed Bank President Patrick Harker, saying that the US central bank is fully committed to bringing inflation back down to the 2% target.

Dips could be seen as a buying opportunity

This, for the time being, puts a floor under the US Treasury bond yields, which holds back traders from placing aggressive bearish bets around the USD and contributes to capping gains for the non-yielding Gold price. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for the XAU/USD is to the upside. Hence, any meaningful corrective pullback is more likely to get bought into and is more likely to remain limited.

Gold price technical outlook

From a technical perspective, the daily swing high, around the $2,020-$2,021 area, now seems to act as an immediate hurdle ahead of the $2,032 region, or over a one-year high touched last week. A sustained strength beyond will be seen as a fresh trigger for bullish traders and allow Gold price to accelerate the momentum towards the $2,048-$2,050 intermediate resistance en route to the all-time high, around the $2,070-$2,075 region.

On the flip side, any meaningful pullback is more likely to find decent support near the $2,000-$1,990 area. A convincing break below should pave the way for a slide towards the $1,955-$1,950 region before the Gold price eventually drops to the next relevant support near the $1,935-$1,934 area. The corrective decline could get extended further towards the $1,918-$1,917 horizontal zone en route to the $1,900 round-figure mark.

Key levels to watch

XAU/USD

Overview
Today last price2010.99
Today Daily Change7.16
Today Daily Change %0.36
Today daily open2003.83
 
Trends
Daily SMA201973.27
Daily SMA501901.75
Daily SMA1001867.33
Daily SMA2001789.62
 
Levels
Previous Daily High2007.52
Previous Daily Low1988.88
Previous Weekly High2032.11
Previous Weekly Low1949.83
Previous Monthly High2009.88
Previous Monthly Low1809.46
Daily Fibonacci 38.2%2000.4
Daily Fibonacci 61.8%1996
Daily Pivot Point S11992.63
Daily Pivot Point S21981.44
Daily Pivot Point S31973.99
Daily Pivot Point R12011.27
Daily Pivot Point R22018.72
Daily Pivot Point R32029.91

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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