Gold Price Forecast: XAU/USD bears await Federal Reserve decision, United States Non-farm Payrolls

• Gold price stays depressed after probing five-week uptrend with bearish candlestick on weekly, support line break.
• Federal Reserve interest rate hikes in question as United States data flash mixed signals.
• Fears of US recession join easing inflation woes to challenge US Dollar buyers, probing XAU/USD bears.
• Hawkish Fed, upbeat US statistics could recall Gold sellers.

Gold price (XAU/USD) holds lower ground near $1,925 after posting an indecisive weekly closing as the metal traders await the key United States data and the Federal Reserve’s (Fed) monetary policy decision. Also important will be central bank meetings of the European Central Bank (ECB), Purchasing Managers’ Indexes data and the US employment numbers for January.

In doing so, the XAU/USD portrays the market’s inaction, as well as cautious mood ahead of the aforementioned catalysts, amid the absence of Chinese traders, Fed/ECB blackout and also due to the mixed US statistics.

Mixed United States statistics probe US Dollar bears, weigh on Gold price

Among the key data from the United States, better-than-expected fourth-quarter (Q4) Gross Domestic Product (GDP) and the Core Personal Consumption Expenditures (PCE) Price Index for December gained major attention. However, the actual releases were softer than their previous outcomes and hence signaled that the Federal Reserve’s (Fed) front-loading of interest rates has finally helped exert downside pressure on spending and inflation fears. That same built market forecasts that the Fed may rethink its aggressive rate and the policy pivot. It’s worth observing, however, that the figures like Durable Goods Orders for December and Weekly Initial Jobless Claims were joined by the last comments from the Fed policymakers resisting policy pivot to keep the hawks hopeful, which in turn weighed on the Gold price.

That said, the Federal Reserve's preferred gauge of inflation, namely the Core Personal Consumption Expenditures (PCE) Price Index, matched 4.4% YoY market forecast versus 4.7% prior while the monthly figure rose to 0.3% versus 0.2% expected and previous readings. Further, the US Bureau of Economic Analysis' (BEA) first estimate of the US fourth quarter (Q4) Gross Domestic Product marked an annualized growth rate of 2.9% versus 2.6% expected and 3.2% prior. On the same line, the Durable Goods Orders jumped 5.6% in December versus 2.5% market forecast and -1.7% upwardly revised prior. Furthermore, the growth of Personal Consumption Expenditures Prices weakened to 3.2% QoQ in Q4 compared to 4.3% marked forecast and prior readings. Further, Core Personal Consumption Expenditures eased to 3.9% QoQ for Q4 from 4.7% previous readings, versus 5.3% expected.

Even with the mixed US data, the US 10-year Treasury bond yields managed to snap a three-week south-run while posting 0.60% weekly gain to 3.50% by the end of Friday. Wall Street benchmarks, on the other hand, printed mixed weekly close.

Amid these plays, the US Dollar Index (DXY) managed to post the lowest weekly loss in three, down 0.07% to 101.92 at the latest, despite posting the third weekly downtrend and refreshing the eight-month low.

Given the inverse relationship between the Gold price and US Dollar, the XAU/USD bulls take a breather ahead of the key data/events.

Federal Reserve’s dovish hike can recall XAU/USD buyers

The aforementioned United States (US) data contrasts with the Federal Reserve (Fed) policymakers’ hesitance to welcome doves, which in turn will be interesting to watch for Gold traders. The reason could be linked to the nearness of the US central bank’s pivot rate of around 4.50% and the market’s talks of no rate hikes after a 0.25% increase in benchmark rates in February. That said, CME’s FedWatch tool suggests considerable favor for the 0.25% rate hike in this week’s monetary policy meeting of the Fed but nearly no supporters of one such move in March. Hence, a dovish hike is on the table and can tease the Gold buyers unless Fed Chairman Jerome Powell sounds hawkish.

Considering this, analysts at Australia and New Zealand Banking Group (ANZ) said, “After starting early and front-loading hikes last year, the Fed is expected to further reduce the amplitude of its hiking and raise the fed funds rate by 25b to 4.50–4.75%. We still think it is close to reaching levels where it will pause. However, the buoyancy in the labor market and slow pace with which services inflation is expected to fall remain problematic, underpinning our view that rates will stay at peak levels in 2023. “

United States employment data to direct post-Fed Gold moves

Apart from the Federal Reserve (Fed) concerns, the United States (US) monthly job report for January will also be important for Gold traders. As per the market forecasts, the headline Nonfarm Payrolls (NFP) is expected to ease to 175K from 223K prior while the Unemployment Rate might also inch up from 3.5% to 3.6%. It’s worth observing that an anticipated uptick in the Average Hourly Earnings, to 4.9% YoY versus 4.6% prior, might contradict the downbeat forecasts for top-tier job numbers and may defend Gold sellers.

Many more catalysts to entertain XAU/USD traders

Other than the Federal Reserve’s (Fed) showdown and the United States jobs report for January, the monetary policy verdict of the European Central Bank (ECB) will also be important for Gold traders as it affects the US Dollar via Euro (EUR) moves. Additionally, the Institute for Supply Management’s (ISM) Purchasing Managers’ Indexes (PMI) will provide extra directions to the XAU/USD traders.

It should be noted that the hawkish ECB outcome is on the table and could challenge the Gold sellers, by exerting downside pressure on the US Dollar. On the same line, the ISM Services PMI grabbed XAU/USD buyer’s attention after marking the first below-50 figure, suggesting a contraction in activities since June 2020, for December 2022 during early January. Hence, any further deterioration in the key US activity numbers could offer a bumpy road to the Gold sellers even if the Fed and US employment data favor XAU/USD weakness.

Also read: Gold Price Weekly Forecast: Bulls to remain in control as long as $1,900 stays intact

Gold price technical analysis

Gold price slipped into bear’s radar after breaking a two-week-old support line on Friday, now resistance around $1,940. Not only the support line break but the looming bear cross on the Moving Average Convergence and Divergence (MACD) indicator and a pullback in the Relative Strength (RSI) line, placed at 14, also teases the XAU/USD sellers.

Gold price: Daily chart

Trend: Further downside expected

Additionally favoring the Gold sellers is the “Gravestone Doji” bearish candlestick on the weekly formation, as well as overbought RSI (14) on the same timeframe.

Gold price: Weekly chart

Trend: Pullback expected

That said, the $1,900 threshold and the January 18 swing low surrounding $1,896 restrict short-term Gold downside. Following that, the 21-Daily Moving Average (DMA), near $1,892 by the press time, could act as the last defense of the metal buyers.

On the flip side, the immediate support-turned-resistance line near $1,940 holds the key to the Gold buyer’s re-entry.

Following that, the multi-month high marked in the last week around $1,950 and March 2022 peak close to $1,966 will precede an upward-sloping resistance line from the mid-December 2022, surrounding $1,972 at the latest, to challenge the Gold bulls.

It’s worth noting that the XAU/USD run-up beyond the $1,972 hurdle won’t hesitate to challenge the $2,000 psychological magnet.