Gold Price Forecast: XAU/USD shows resilience below 200-hour SMA, bulls have the upper hand

• Gold price oscillates in a narrow range as traders keenly await this week’s key central bank events.
• Bets for smaller Fed rate hikes keep the USD bulls on the defensive and continue to lend support.
• The technical setup favours bullish traders and supports prospects for a further near-term move up.

Gold price kicks off the new week on a subdued note and oscillates in a narrow trading band through the Asian session. The XAU/USD, meanwhile, remains well within striking distance of a nine-month peak touched last Thursday as investors move to the sidelines ahead of the Federal Reserve’s (Fed) rate-hike verdict later this week.

The Fed will announce its policy decision at the end of a two-day meeting on Wednesday and is expected to raise interest rates by a smaller 25 bps. This would further moderate the pace of the rate-hike cycle, which keeps the US Dollar bulls on the defensive and continues to act as a tailwind for the non-yielding Gold price. The prospects for a less aggressive policy tightening by the Fed were reaffirmed by Friday's release of the Personal Consumption Expenditures (PCE) data from the US.

The Fed's preferred inflation gauge, the Core PCE Price Index, declined to the 4.4% YoY rate in December from 4.7% previous and added to signs of easing inflationary pressure. However, other US macro data released recently pointed to a resilient economy and backed the case for the Fed to maintain its hawkish stance for longer. Hence, investors will look for cues on the Fed's stance on future rate hikes, which will influence the USD and provide a fresh directional impetus to the Gold price.

Apart from this, traders this week will focus on the Bank of England (BoE) meeting and the European Central Bank (ECB) decision, both scheduled on Thursday. Any hawkish signals from major central banks will likely be negative for Gold price and set the stage for a deeper corrective pullback. Market participants also await the release of the fourth-quarter economic growth data and the flash inflation readings from the Eurozone, along with the closely-watched US monthly jobs data (NFP) on Friday.

In the meantime, the underlying bearish sentiment surrounding the USD might continue to support the Gold price. That said, a generally positive tone around the equity markets might hold back traders from placing aggressive bulls bets around the safe-haven XAU/USD and keep a lid on any meaningful upside, at least for the time being.

Technical Outlook

From a technical perspective, Gold price, so far, has been showing some resilience below the 200-hour SMA and continues to attract some buyers near the $1,920-$1,915 area. The latter should now act as a pivotal point and should continue to protect the immediate downside. A convincing break below can drag the XAU/USD back towards the $1,900 round-figure mark. Some follow-through selling might shift the near-term bias in favour of bearish traders and set the stage for a deeper corrective pullback.

On the flip side, the multi-month peak, around the $1,949 zone, now becomes an immediate strong barrier. A sustained strength beyond has the potential to lift the Gold price to the $1,969-$1,970 region. The momentum could get extended further and allow the XAU/USD bulls to surpass an intermediate hurdle near the $1,980 zone towards reclaiming the $2,000 psychological mark for the first time since March 2022.