Gold Price Forecast: XAU/USD reclaims $1,750 as USD Index struggles to extend gains, US ADP eyed

• Gold price has reclaimed $1,750.00 as the USD Index has failed to extend its recovery despite the risk-off mood.
• The speech from Federal Reserve chair Jerome Powell will trim ambiguity over interest rate slowdown chatters.
• Before United States NFP, US ADP Employment data will provide meaningful cues about the labor market status.
• Gold price is expected to remain on the sidelines ahead of Federal Reserve chair Jerome Powell’s speech and US ADP data.

Gold price (XAU/USD) has attempted a rebound after dropping below the critical support of $1,750.00 in the early European session. The precious metal has reclaimed the $1,750.00 hurdle again as the US Dollar Index (DXY) is struggling to extend its gains after sensing strength in the Tokyo session. The USD Index is failing to sustain above a two-day high at 106.40 despite a cautious market mood.

The situation of unrest in China as households have been frustrated being at home following Covid-19 protocols for a tad longer period. This has spooked the entire global market. S&P500 futures are extending their losses continuously, portraying a risk-aversion theme. Meanwhile, the returns on US Treasury bonds have weakened further as investors have turned anxious ahead of the speech from Federal Reserve (Fed) chair Jerome Powell, scheduled on Wednesday. The 10-year US Treasury yields have dropped to below 3.63%.

China’s unrest cripples Gold price recovery

Intensifying protests by individuals against anti-Covid lockdown measures by the Chinese authorities to curtail infections have dampened the risk-appetite theme. This has led to a sheer decline in the risk-sensitive currencies but has supported the US Dollar. It is worth noting that the decline in gold price is fairly lower than fall risk-perceived assets. The catalysts that are impacting gold price majorly are a recovery in the US Dollar, and anxiety ahead of the speech from Federal Reserve chair Jerome Powell.

Fed chair Jerome Powell’s speech to ease obscurity over 75 bps rate hike spell

Chatters over a slowdown in the current rate hike pace by the Federal Reserve have gone rooftop. Whatever the decision the Federal Reserve will take in the December monetary policy on interest rates, the risk-sensitive assets have enjoyed a ball. Last week’s Federal Open Market Committee (FOMC) minutes cleared that Federal Reserve policymakers are favoring a deceleration in the rate hike pace to reduce financial borrowings and to observe the efforts yet made to slow down inflation.

The speech from Federal Reserve chair Jerome Powell will provide cues to the market participants about whether the Federal Reserve will continue its 75 basis points (bps) rate hike spell or will shift to a lower rate hike extent. A softer tone used for interest rate guidance would strengthen Gold price ahead.

United States ADP Employment- a crucial trigger ahead of US Nonfarm Payrolls

This week, the United States Nonfarm Payrolls (NFP) data will be of significant importance. The extent of the change in employment level in the United States in November will have a critical impact on the interest rate decision by the Federal Reserve. But before that, investors will keep an eye on the United States Automatic Data Processing (ADP) Employment data. According to the estimates, the US economy has added 200k fresh jobs in the labor market, lower than the prior release of 239k.  

The Federal Reserve is continuously tightening its monetary policy, which has resulted in weaker economic projections. Firms have postponed their expansion plans due to higher interest obligations. This has also forced them to postpone their demand for manpower.

Gold technical outlook

Gold price has displayed a steep recovery after testing the 38.2% Fibonacci retracement (plotted from November 3 low at $1,616.69 to November 15 high at $1,758.88) at $1,722.00 and has also crossed the 23.65 Fibo retracement at $1,746.50 on an hourly scale.

The precious metal is hovering around the 50-period Exponential Moving Average (EMA) at $1,753.17, which indicates uncertainty over the short-term trend.

Meanwhile, the Relative Strength Index (RSI) (14) has rebounded after sensing support of around 40.00, which signals that dips are explosively capitalized by the market participants.