Gold Price Weekly Forecast: XAU/USD could extend uptrend to $1,950; US GDP in spotlight

• Gold price booked fifth straight weekly gain, at its highest in nine months.
• Another down week for US Treasury bond yields and US Dollar amid renewed recession fears.
• Daily technical setup favors Gold bulls, but overbought conditions warrant caution.

Having started the year with a bang, the bullish momentum in the Gold price remained unabated last week. Gold bulls booked the fifth straight weekly gain amid the persistent weakness in the United States Dollar (USD) alongside the US Treasury bond yields, courtesy of the US Federal Reserve (Fed) rate hike expectations. All eyes now turn toward the fourth quarter advance US Gross Domestic Product (GDP) data release amid mounting recession risks.

Gold price rallied to nine-month highs beyond $1,900

Gold price was at the mercy of the dynamics in the US Treasury bond yields and the US Dollar last week. Risk sentiment also played a pivotal role amid dovish Federal Reserve bets, weak United States economic data and resurfacing recession fears.

It was a national holiday in the United States to begin the week on Monday, as Gold optimists took advantage of thin trading conditions and reached nine-month highs at $1,929. The US Dollar faced a double whammy amid a sell-off in the USD/JPY pair and increased expectations that the Federal Reserve will hike rates at a slower pace amid softening US Consumer Price Index (CPI). Anticipation ahead of the Bank of Japan (BoJ) policy announcements kept the Japanese yen strongly bid against the US Dollar.

The upside in the Gold price, however, was quickly reversed as the US traders returned to the floor. The bright metal extended the corrective decline well into Wednesday. The Bank of Japan’s decision to make no changes to its yield control policy triggered massive volatility around the US Dollar, which did help the Gold price to regain the upside traction. But the US Dollar bulls jumped back into the game and staged a solid recovery from fresh seven-month lows across its major rivals, pushing Gold price briefly below the $1,900 mark. Wednesday’s downbeat Retail Sales and Producer Price Index (PPI) from the United States reinforced dovish Federal Reserve expectations, but it was the disappointing US Industrial Production data that re-ignited concerns over a potential US recession later this year, which triggered a turnaround in the safe-haven US Dollar. A rush to safety boosted the demand for the United States government bonds, weighing heavily on the US Treasury bond yields across the curve.

In light of the extended weakness in the US Treasury bond yields, Gold price snapped its corrective mode on Thursday and swung back higher to refresh the nine-month high at $1,935. Gold price witnessed a renewed $30 upswing, as investors cheered prospects of smaller Federal Reserve rate increments in the upcoming months. Few Fed officials signaled in the week that they would push on with more rate hikes but smaller than seen last year. Philadelphia Fed President, Patrick Harker, joined Dallas Fed President, Lorie Logan, to voice their support for a slower rate-hike pace. Hopes for a dovish Federal Reserve outlook tend to benefit the non-interest-bearing Gold price.

Gold price has paused its upbeat momentum on the final trading day of the week, as investors reassessed the recent series of dismal United States economic data heading toward the critical US Gross Domestic Product data due for release in the week ahead. End-of-the-week flows and speeches by Federal Reserve officials also influenced the Gold price.

United States GDP week

Light trading is likely to persist throughout the week, as Chinese traders will be away, celebrating the Lunar New Year. There is nothing much of note at the start of the week, and hence, Tuesday’s Preliminary Global S&P Purchasing Managers’ Index (PMI) from the United States will be eyed for fresh trading impetus.

Wednesday is also devoid of any high-impact US macro releases. Thursday’s economic docket will see the release of the critical United States Preliminary Gross Domestic Product data for the fourth quarter alongside the Durable Goods, weekly Jobless Claims and New Home Sales, which could keep Gold traders entertained, especially as the Federal Reserve remains data-dependent on its policy outlook. The health of the US economy will be closely scrutinized amid growing recession risks.

The Federal Reserve’s favorite inflation gauge, the Core PCE Price Index will feature on Friday, accompanied by the Personal Spending data. The next to note will be the United States Pending Home Sales data and revised University of Michigan (UoM) Consumer Sentiment and Inflation Expectations.

It’s worth noting that the Federal Reserve will be in the ‘blackout period’ ahead of the February 2 monetary policy decision. Therefore, the US economic data will emerge as the main market driver along with risk trends, as the US corporate earnings reports will be also closely followed. 

Gold price technical outlook

Gold price: Daily chart

The Gold price rebound from the horizontal trendline support around $1,897 levels has revived the uptrend, with buyers positioned for a test of the $1,950 psychological level.

The next stop for Gold bulls is envisioned at the April 20 and April 22 highs around $1,958. A sustained break above the latter will trigger a fresh rally toward the critical $2,000 threshold.

The 14-day Relative Strength Index (RSI) is peeping into the overbought territory, at around 71.00, suggesting that there is more room to the upside.

Alternatively, Gold sellers will once again challenge the aforementioned support just beneath $1,900 should investors resort to profit-taking on their Gold longs, in the face of the recent upsurge.

Daily closing below the said downside cap will open floors for a further correction toward the $1,865 region, where January 11 high and the ascending 21-Daily Moving Average (DMA) merge.

XAU/USD sentiment poll

According to the FXStreet Forecast Poll,  the XAU/USD pair is on its way to $2,000 a troy ounce. Gold is expected to advance next week, and while the number of buyers decreased as time goes by, they still represent a good bunch of market players. $1,900.00 has become a relevant floor, as, on average, XAU/USD is seen holding above it in the three-time frames under study.

The Overview chart confirms the bullish bias, as the three moving averages under study extended their advances and stand at fresh multi-month highs. There are some extreme bets one way or the other, but overall bulls are in control of Gold.