Gold Price Forecast: XAU/USD struggling to stay above $1,800 ahead of US data
- Gold price stays in bearish mode, approaching $1,800 psychological support.
- US Dollar stays dominant across the board as US macroeconomic data keeps beating expectations.
- ISM Manufacturing and Services PMI releases headline a mid-tier economic data week.
Gold price is back on the bear trail on Tuesday as the US Dollar re-gathers its strength across the market board. The bright metal is trading above the round $1,800 figure, which provides immediate and psychological support. XAU/USD broke a five-day losing streak on Monday as the market took a breather from the currently dominant trend of re-assessing the Federal Reserve future rate hike path in a hawkish way. That just seemed to be a small retracement in the way of the continuing downtrend for Gold price.
This week, a bunch of mid-tier United States macroeconomic releases could help shape how much more room Gold price can have to the downside ahead of the crucial March 22 Federal Reserve (Fed) meeting. The US central bank probably will take all the data into account before delivering its next monetary policy plan – the now famously known as dot plot – although the next two weeks with Nonfarm Payrolls and Consumer Price Index should be more impactful.
Gold news: Consumer Confidence more relevant than Durable Goods Orders
The Conference Board’s Consumer Confidence Survey for February is the next big US macroeconomic release, scheduled for 15:00 GMT, and will be scrutinized for more direction. Rather than the headline Consumer Confidence index, the one-year consumer inflation expectations could trigger a reaction. In January, this component of the survey climbed to 6.8% from 6.6% in December. In case there is a pullback in this figure, the US Dollar could lose interest and help Gold price stage a short-term recovery and vice versa.
On Monday, the US Census Bureau released the Durable Goods Orders data for January on Monday, which came out mixed and did not stage a big reaction from the markets. The headline figure was worse than expected, showing a bigger decline (-4.5%) than what the consensus had forecast (-4.0%), but the core Nondefense Capital Goods Orders ex Aircraft beat expectations, showing a growth of 0.8% (vs 0.0% expected.) Gold price reacted modest-but-positively to this release as the US Dollar was somewhat sold across the board.
United States Manufacturing and Services PMIs on the way
The ISM will publish the Manufacturing PMI and the Services PMI on Wednesday and Friday, respectively, both at 15 GMT, which could be the most important releases of the week.
If the ISM Services PMI report reaffirms that rising wage costs are feeding into accelerating price pressures in the sector, the US Dollar is likely to hold its ground against Gold. Hence, the Prices Paid Index component will be watched closely by market participants.
It’s worth noting, however, that the CME Group FedWatch Tool shows that markets are fully pricing in at least two more 25 basis points Federal Reserve rate hikes in March and May. Additionally, the probability of the Fed holding the policy rate unchanged in June stands at 25%.
The market positioning suggests that the US Dollar doesn’t have a lot of room on the upside, at least until the February jobs report and inflation data confirm or refute one more 25-bps hike in June.
In the meantime, investors will be watching the US Treasury bond yields. 4% aligns as key resistance for the 10-year US T-bond yield and there could be a technical correction if that level stays intact. In that scenario, Gold price could turn north due to the inverse correlation with the US Treasury yields.
Gold price faces strong resistance at $1,825
Anil Panchal, News Editor at FXStreet, identifies key resistances for Gold price on the Technical Confluence Indicato. Staying below these levels keeps the bright metal bearish:
Fibonacci 23.6% on daily and Pivot Point one-day R1 guards immediate upside of the Gold price near $1,820 and $1,822, before highlighting the key $1,825 hurdle. Should the XAU/USD price remains firmer past $1,825, a convergence of the 10-DMA and Fibonacci 61.8% on one-day, near $1,833, precedes the $1,838 hurdle including Pivot Point one-week R1 and one-day R3 to challenge the bulls.
Overall, the Gold price stays well-set to end February on a negative note.
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 daily chart
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 below the yearly open, around $1,800.