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Gold Price Forecast: US Dollar still the king, XAU/USD trends down ahead of US economic releases


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  • Gold price triggered another bearish run after FOMC Minutes showed a somewhat hawkish stance.
  • US Dollar stays dominant across the board ahead of US Gross Domestic Product second estimate for Q4.
  • PCE disinflation should continue, but any surprise could have a notable impact on Gold.

Gold price keeps trending lower after a bearish Wednesday, where the bright metal was weighed down by the release of somewhat hawkish Federal Open Market Committee (FOMC) Minutes. US Dollar made gains across the board, and XAU/USD closed below what had been thick support at $1,830 for the first time since January 3. 

Market eyes will turn now to Friday’s US Personal Consumption Expenditures (PCE) Price Index release, the Fed’s preferred measure of inflation.

Gold news: FOMC Minutes hawkish, US Gross Domestic Product second estimate next

The FOMC Minutes showed that all Federal Reserve policymakers agreed more rate hikes would be needed to achieve inflation objectives and even that “a few participants” trend towards raising interest rates by 50 basis points, which would speed up the tightening monetary policy again. 

This hawkish tone helped US Treasury bond yields rally, supporting the USD and weighing on the Gold price.

Thursday’s economic docket has the publication scheduled for 13:30 GMT of the second reading of the US Gross Domestic Product (GDP) numbers for the last quarter of 2022, but the market does not expect any changes to the 2.9% growth printed in the preliminary estimate. The weekly Jobless Claims release at the same time and some Fed speakers later in the day could bring some fresh action to Gold price. 

US PCE disinflation to continue, but how fast?

More important is the economic data to come out on Friday. The US Bureau of Economic Analysis (BEA) will publish the PCE Price Index, the Fed’s preferred gauge of inflation, at 13:30 GMT on Friday. Gold traders and investors will watch the data release closely, as Core PCE inflation is forecast to rise by 0.4% on a monthly basis but the annual figure is expected to decline to 4.1% in January from 4.4% in December. The market reaction should be straightforward, with a softer-than-expected monthly PCE inflation weighing on the US Dollar and vice versa, with Gold price reacting the opposite way. 

Considering that the CPI report already revealed that inflation remained sticky in January, it would be surprising to see this data have a long-lasting impact on markets.

Gold price risks skewed to the downside

Anil Panchal, News Editor at FXStreet, lines up the Gold price targets levels for bears to continue on their current run:

A downside break of the $1,825-23 horizontal support could drag the Gold price towards the 78.6% Fibonacci retracement level of $1,813 and then to a three-week-old descending support line, close to $1,803. In a case where the Gold price remains weak past $1,803, the $1,800 round figure may act as an additional downside filter. Overall, the Gold price remains on the bear’s radar despite the recent rebound.

Gold price: Mining developments and supply-side dynamics

Even if the demand side is usually much more impactful on Gold price than the supply one, the other side of the market dynamics is also worth tracking. Gold output from across the Americas is likely to grow in 2023 as existing mining projects in North America keep expanding. Some of the Gold price downtrend in the latter part of 2022 can be attributed to the rising supply. 

But to keep up with this surge in activity, mining companies also had to cope with surging inflation raising the costs of mining operations around the world, which was a factor supporting the Gold price. The disinflation process forecast for 2023, as central banks keep tightening their monetary policies to combat inflation, should have a particular bearish effect on Gold price, the extent of which will probably be limited, or at least secondary compared to demand-side speculative interest forces.

Gold price in 2023: Up-and-down action

Financial markets have been a two-tale story for the early part of 2023, in which Gold price has reflected in its price action like no other asset. XAU/USD rode an uptrend during all of January with the market optimism about inflation slowing down and constant Federal Reserve dovish talk, only to see a drastic turnaround back to the old dynamics in February after a hot US Nonfarm Payrolls (NFP) report. The US economy adding more than 500K jobs in the month of January shifted the market expectations for the Fed easing its monetary policy, and the US Dollar has come back to the market King throne.

Gold price opened the year at $1,823.76 and reached a year-to-date high of $1,960 on February 2, right in between the first Federal Reserve meeting of the year and the surprising release of the US jobs report for January. Since then, the ongoing downtrend has been relentless, reaching levels close to the yearly open, around $1,830.

Gold price daily chart