Gold Price Forecast: XAU/USD eyes triangle breakout on Federal Reserve Chair Powell

Gold price is looking to build on Tuesday’s recovery gains above $1,750 as traders brace for a busy Wednesday trading, with high-tier United States economic data and Federal Reserve Chair Jerome Powell’s speech to hog the limelight.

Federal Reserve Chair Jerome Powell, United States data in focus

The United States Dollar (USD) has stalled its four-day recovery mode in Wednesday’s trading, allowing Gold price to resume the previous rebound from near the $1,740 region. The renewed weakness in the US Treasury bond yields also weighs on the US Dollar. Markets are repositioning their USD trades amid the end-of-the-month flows and ahead of a fresh batch of significant United States economic data releases and the highly-anticipated speech from the US Federal Reserve Chair Jerome Powell.

Among the US macro news, the ADP Employment Change, JOLTS Job Openings and Pending Home Sales data will be closely scrutinized for fresh insights on the state of the United States economy. However, Federal Reserve Chairman Powell’s speech will steal the show, hinting at the central bank’s future monetary policy path. Powell is scheduled to deliver a speech on the economic outlook, inflation, and the labor market at the Brooking Institution, in Washington DC. It will be his last appearance before the Federal Reserve enters the ‘blackout period’ ahead of the December 14 monetary policy meeting. Therefore, his speech will hold utmost relevance, especially after the recent commentary from several Federal Reserve policymakers has pushed back the narrative of a dovish Fed pivot in the coming months. Markets are pricing a 65% chance of the US central bank hiking rates by 50 basis points (bps) next month.

United States Dollar eases on China reopening optimism

Following the coronavirus lockdown-induced protests in China, a slight drop in covid cases, and a boost to vaccination campaigns for the elderly, speculations are rife that China is likely to do away with its stringent zero-Covid policy and move to reopen the economy. In one such evidence, China loosened its COVID-19 restrictions in the city of Zhengzhou with a key Apple iPhone plant. Reopening optimism underpins the sentiment around the Gold price, as it suggests a potential boost to the country’s jewelry demand, as restrictions are lifted. China is the world’s biggest Gold consumer.  

However, investors remain wary as business activity in China contracted in November, reflected by the National Bureau of Statistics (NBS) Manufacturing and Non-Manufacturing PMIs. China's Manufacturing PMI came in at 48 in November, down from 49.2 in October while the Non-Manufacturing PMI dropped sharply to 46.7 in November from 48.7 in October.

2/10-year US Treasury bond yields curve inversion widens

Investors also stay unnerved and scurry for safety in the traditional safety net, Gold price, as the closely watched two-year and 10-year US Treasury bond yield curve inversion widened on Tuesday, raising fears of an imminent recession in the United States economy. Currently, the spread between the 10-year and two-year Treasury bonds is more than 73 basis points, the widest in decades, according to CNBC.

Gold price technical outlook: Four-hour chart

Gold price is on the verge of yielding a symmetrical triangle breakout on the four-hour chart. The bright metal needs a  four-hour candle stick close above the falling trendline resistance at $1,759 to confirm the upside break. If Federal Reserve Chair Jerome Powell backs the dovish pivot, Gold bulls could see the much-needed boost.

A fresh upswing toward the $1,770 round figure cannot be ruled out. The next upside target is envisioned at the multi-month highs at $1,787.

The Relative Strength Index (RSI) trades listlessly while above the midline, keeping bulls hopeful.  

On the flip side, there is strong support around the $1,750 level, where the 21, 50 and 100-Simple Moving Averages (SMA) converge.

A breach of the latter will expose the rising trendline support at $1,745. A sustained move below that support could validate a downside break from the symmetrical triangle, opening floors for deeper declines toward the $1,730 round figure.