Gold Price Forecast: XAU/USD rebound needs validation from Federal Reserve Minutes, United States data

• Gold price bounces off 10-week-old horizontal support but braces for the first monthly loss in four.
• Fears of higher Federal Reserve rates, no rate cuts in 2023 underpin US Dollar and weigh on XAU/USD.
• Geopolitical concerns add strength to the Gold price weakness.
• Monday’s holiday in the United States, Canada may offer a soft start to the key week, FOMC Minutes will be eyed closely.

Gold price (XAU/USD) stays defensive around $1,842, after bouncing off multi-day-old horizontal support the previous day. In doing so, the yellow metal portrays the XAU/USD traders’ cautious mood ahead of this week’s bumper data and events. Adding strength to the metal’s inaction could be the United States and Canadian holidays on Monday. Even so, hawkish bets on the Federal Reserve (Fed) and firmer US data keep the Gold sellers hopeful of witnessing further downside should the scheduled catalysts favor the bears.

Gold bears cheer upbeat United States data, Federal Reserve talks

With the firmer prints of the United States Consumer Price Index (CPI) and Retail Sales following the previously flashed upbeat readings of employment and output data, the odds of the US economy witnessing easy inflation appear far from here. The same joins hawkish Federal Reserve comments to underpin the firmer US Treasury bond yields and the US Dollar to exert downside pressure on the Gold price.

In the last week, the US Consumer Price Index (CPI) rose past market expectations to 6.4% YoY, versus 6.2% forecast and 6.5% prior. More importantly, CPI ex Food & Energy, better known as the Core CPI, grew 5.6% YoY compared to 5.5% market forecasts and the 5.7% previous readings.

Following that, US Retail Sales growth jumped to 3.0% YoY in January versus 1.8% expected and -1.1% prior. Further, The Retail Sales ex-Autos grew by 2.3% in the same period, compared to analysts' estimate of +0.8%.

As per the latest Federal Reserve (Fed) talks, Fed Governor Michelle Bowman said on Friday that they are seeing a lot of inconsistent data in economic conditions, as reported by Reuters. On the contrary, Richmond Fed President Thomas Barkin said on Friday that they are seeing some progress on inflation with demand normalizing, as reported by Reuters. It should be noted that Fed Chairman Jerome Powell and others at the Fed have strongly favored an absence of rate cuts in 2023, which in turn backed the higher Fed rates and risk-off mood, which in turn propelled the US Treasury bond yield and the US Dollar, ultimately weighing on the Gold price.

Amid these plays, the US 10-year Treasury bond yields rose to the highest levels since early November while the equity benchmarks were mostly in the red. That said, the US Dollar Index (DXY) marked the third consecutive weekly gain.

Geopolitics also challenges XAU/USD bulls

Apart from the aforementioned catalysts surrounding the data and the Federal Reserve talks, the headlines surrounding China and Russia also weigh on the sentiment and exert downside pressure on the Gold price. Recently, The US ambassador to the United Nations, Ambassador Linda Thomas-Greenfield, said Sunday that China would cross a “red line” if the country decided to provide lethal military aid to Russia for its invasion of Ukraine, per Reuters. The news joins the US-China tension about Taiwan and the geopolitical tension among the world’s top two economies to favor the Gold bears.

It should be observed that the latest meeting between US Secretary of State Antony Blinked and China top diplomat Wang Yi seemed to fail in restoring the US-China ties. The reason could be linked to Chinese diplomat’s comments saying that the US must change course and repair the damage done to Sino-US ties by indiscriminate use of force.

Fed Minutes, US GDP eyed

Monday’s holiday in the US joins a light calendar elsewhere to offer a sluggish start to the key week comprising monetary policy meeting minutes by the Federal Reserve (Fed), up for publishing on Tuesday. Also important to watch will be the second reading of the US fourth quarter (Q4) Gross Domestic Product. That said, the market players will be more interested in hearing the clues on how low the rate trajectory can last. Also important will be the confirmation of the upbeat flash GDP, which in turn could weigh on the Gold price.

Gold price technical analysis

A horizontal support area stretched from December 20, 2022, challenges the Gold bears around $1,820. Adding strength to the recovery hopes is the metal’s upside break of a three-week-old descending trend line.

However, the metal’s sustained trading below the 50-Day Moving Average (DMA), as well as the previous support line from late November 2022, keeps the sellers hopeful. On the same line are the bearish signals from the Moving Average Convergence and Divergence (MACD) index, as well as the downbeat Relative Strength Index (RSI) line, placed at 14.

That said, the quote’s latest rebound needs validation from the 50-DMA and the support-turned-resistance line, respectively near $1,860 and $1,910, to convince buyers.

Following that, the monthly high of $1,960 and late March 2022 peak surrounding $1,966 could lure the Gold buyers.

Alternatively, a downside break of the aforementioned horizontal support, around $1,820 can trigger a fresh south run towards November 2022 high near $1,786.

In a case where the Gold price remains weak past $1,786, the odds of witnessing a slump toward the last November’s low near $1,721 can’t be ruled out.

Overall, the Gold price remains indecisive as bears have recently been challenged. However, XAU/USD bulls have a tough road to retake control.

Gold price: Daily chart

Trend: Further downside expected