Gold Price Forecast: XAU/USD holds record-rally amid overbought conditions, ahead of US data
- Gold price sits at highest level on record above $2,850 early Wednesday.
- Uncertainty over US President Trump’s tariffs, impending US-Sino trade war underpin Gold price.
- Deteriorating risk sentiment on China return could revive the haven demand for the US Dollar.
- Overbought conditions on the daily chart continue to caution Gold buyers ahead of US jobs data.
Gold price is holding the record-setting rally early Wednesday, hanging close to the levels seen ever near $2,850. Traders gear up for the upcoming US private sector employment data and US-China trade talks for Gold price action.
Gold price keeps an eye on US data and US-China trade talks
The buying interest around the traditional store of value, the Gold price, remains unabated so far this week, courtesy of the growing uncertainties over US President Donald Trump’s tariff policies and their impact on the global growth and inflation outlook.
The Trump administration's tariff pushback on Canada and Mexico for a month and the US-Sino trade war keep investors on edge, especially with Chinese traders returning after a week-long Lunar New Year holiday.
A mixed set of US economic data releases in the ISM Manufacturing PMI and the Jobs Openings survey help maintain the bets for two US Federal Reserve (Fed) interest rate cuts this year even as Fed policymakers express caution on further rate cuts. This remains supportive of the non-interest-bearing Gold price.
However, the Gold price could face a headwind in the near term if the US succeeds in ending the Israel-Hamas geopolitical conflict. Israeli Prime Minister Benjamin Netanyahu and Trump met on Tuesday at the White House and discussed the elimination of Hamas, Iran strategy and renewed Israel-Saudi normalization.
The 47th American President, however, expressed uncertainty on whether the ceasefire deal between Hamas and Israel will hold. “ Gold tends to benefit in times of geopolitical instability and market turmoil.
Looking ahead, the impending trade talks between US President Donald Trump and his Chinese counterpart Xi Jinping are eagerly awaited. White House spokeswoman Karoline Leavitt told reporters that a Trump-Xi call still needed to be scheduled. "President Xi did reach out to President Trump to speak about this, maybe to begin a negotiation. So we'll see how that call goes," Leavitt told Fox Business Network earlier on Tuesday.
In the meantime, the US employment data might reclaim the spotlight, given the increasing uncertainty around the Fed’s scope and timing of interest rate cuts. The US ADP Employment Change is seen arriving at 150K in January after registering 122K in December. Later in American trading, the US ISM Services PMI data will also offer fresh trading impetus, followed by speeches from Fed policymakers Austan Goolsbee and Michelle Bowman.
Gold price remains at the mercy of the US Dollar (USD) dynamics amid a cautious market environment heading into the US data releases.
Gold price technical analysis: Daily chart
The daily chart warrants caution for Gold optimists as the 14-day Relative Strength Index (RSI) remains within the overbought territory, currently near 75.
If buyers face exhaustion, a pullback could be in the offing before the uptrend resumes.
If a correction sets in, Gold price could challenge the $2,800 round level, below which the February 3 low of $2,772 will be tested.
Additional declines will put the January 30 low of $2,754 at risk. The last line of defense for buyers is seen at the 21-day SMA at $2,731.
However, the 50-day Simple Moving Average (SMA) and 100-day SMA Bull Cross keep hopes alive for buyers.
On the upside, the Gold price needs a daily candlestick closing above the $2,850 psychological level to refresh record highs near $2,880 en route to the $3,000 round level.
Economic Indicator
ADP Employment Change
The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Next release: Wed Feb 05, 2025 13:15
Frequency: Monthly
Consensus: 150K
Previous: 122K
Source: ADP Research Institute
Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.
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Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
