Gold Price Forecast: The recent chatters surrounding the US-China strain due to the US-Taiwan ties also challenge the Gold buyers, due to the dragon nation’s status as one of the world’s biggest gold (Yellow Metal) consumers.
The US blacklisting of Chinese companies and Beijing’s dislike of a meeting between the White House Speak and the Taiwan President can be considered the key news on that matter. On the same line, Bloomberg said that Taiwanese officials are pushing hard for an agreement to eliminate the burden of double taxation, like the US has with dozens of countries. The same could fury China and allow the Gold sellers to keep the reins.
On the other hand, nuclear threats from Russia and North Korea are also challenging the sentiment and the gold (Yellow Metal) price.
Meanwhile, optimism surrounding the technology and banking sector allows the Gold price to fight back the bears.
- Gold price funnels down towards the breaking point of a volatility-signaling chart pattern.
- Softer United States Treasury bond yields contrast with the US Dollar rebound to weigh on the gold.
- Neutral comments from Federal Reserve officials put a floor under the Gold price.
- Easy inflation can keep the gold buyers hopeful as banking fears fade.
Geopolitical fears and US inflation expectations weigh on Gold price
Although the recent shift in the Federal Reserve (Fed) tone and the market’s cautious optimism keeps the Gold buyers hopeful, a jump in the US inflation expectations and an absence of dovish comments from major central banks prod the gold bulls. As a result, today’s preliminary readings of the Harmonized Index of Consumer Prices (HICP) gauge for Germany and the US fourth quarter (Q4) Core Personal Consumption Expenditure (PCE) details will be important to watch for the Gold traders. It’s worth noting that an increase in price pressure pushes the central banks towards higher rates and the same can weigh on the precious metal.
Gold price drops as US Dollar rebounds ahead of key inflation release
Gold (Yellow Metal) price bears the burden of the US Dollar’s rebound as traders await the key data/events. That said, the US Dollar Index (DXY) marked the first daily gain in three the previous day, down 0.05% intraday near 102.65 by the press time.
A retreat in the US Treasury bond yields joined the quarter-end positioning and cautious optimism in the market to underpin the US Dollar’s latest rebound. Adding strength to the greenback’s rebound could be the geopolitical fears emanating from China, Russia and North Korea. However, an absence of hawkish comments from the Federal Reserve (Fed) officials joins the absence of talks about banking woes to weigh on the US Dollar.
That said, the US 10-year and two-year Treasury yields marked their first daily loss on Wednesday by ending the North American trading session around 3.57% and 4.10% respectively.
It should be noted that the US Dollar gains, as well as the Gold price weakness, could also be linked to the increase in the US inflation expectations, per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED).
Mixed Fed comments and risk-on mood challenge Gold sellers
Alternatively, the Federal Reserve (Fed) officials’ hesitance in suggesting further rate hikes seems to challenge the greenback buyers, which in turn keeps the Gold buyers hopeful. Bloomberg came out with the news suggesting Fed Chair Jerome Powell showed forecasts for one more rate hike in 2023, which in turn pushed back talks of policy pivot and favor the US Dollar bulls. Though, Vice Chair for Supervision Michael Barr said, “We will be looking at incoming data, financial conditions to make a meeting-by-meeting judgment on rates.”
Gold Price Technical Outlook
Gold price seesaws within a one-week-old symmetrical triangle, suggesting more volatility on the breakout. That said, the impending bull cross on the Moving Average Convergence and Divergence (MACD) indicator joins the hidden bullish divergence between the Relative Strength Index (RSI) line, placed at 14, and the price to lure the Yellow Metal bulls.
It’s worth noting that a hidden bullish RSI divergence can be found when the Gold price makes a higher low but the RSI (14) grinds lower.
With this, the Yellow Metal is likely to grind higher with the stated triangle’s top line, close to $1,985 at the latest, which acts as an immediate hurdle towards the north. Following that, the $2,000 round figure and the latest peak surrounding $2,010 can test the Gold buyers before directing them to the previous yearly high of $2,070.
Alternatively, a downside break of the aforementioned triangle’s lower line, near $1,952, can trigger a short-term fall in the Gold price. Though, the 100-bar Simple Moving Average (SMA) level of near $1,923 may check the Yellow Metal sellers before giving them control.
Gold prices resumed the decline on Wednesday amidst shrinking open interest and volume, which hints at the likelihood that a deeper decline is not favoured in the very near term. In the meantime, weekly lows around $1935 (March 21,22) emerge as decent contention for the time being.
CME Group’s flash data for gold futures markets noted traders reduced their open interest positions for the third session in a row on Wednesday, this time by more than 4K contracts. Volume followed suit and dropped for the third straight day, now by around 69.6K contracts.
Gold (Yellow Metal) is defending minor bids so far this Friday, gathering pace for the next push higher toward the $1997 threshold. The renewed upside in the Gold price can be attributed to the broad-based United States Dollar weakness and sluggish performance in the US Treasury yields.
Hopes of upbeat core inflation data from Eurozone, United States join strain in China-US ties to prod bullion (Yellow metal) bulls.