Gold Price Forecast: XAU/USD traces dicey yields below $2,000 as Federal Reserve rate hikes appear difficult

• Gold price struggles to keep the week-start gains, sidelined of late.
• Downbeat United States economics, softer yields weigh on Federal Reserve bets, allowing XAU/USD to rise.
• US job numbers will be crucial to watch as Gold price approach the $2,000 key upside hurdle.

Gold price (XAU/USD) remains sluggish around $1,985 during early Tuesday, following a positive start to the Nonfarm Payrolls (NFP) weeks.  The yellow metal’s latest inaction could be linked to a light calendar and lack of major data/events. However, downbeat United States statistics and softer Treasury bond yields exert downside pressure on the US Dollar and allow the XAU/USD buyers to keep the reins.

Gold price marches on softer yields, downbeat Federal Reserve bets

Gold price managed to cheer downbeat United States activity numbers on Monday, following Friday’s softer US inflation clues. That said, the US ISM Manufacturing PMI dropped to the lowest levels since May 2020 in March, to 46.3 versus 47.5 expected and 47.7 prior. On the same line, the final readings of March’s S&P Global Manufacturing PMI eased to 49.2 compared to 49.3 initial estimations. The weaker PMI data traced the last week’s softer prints of the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation gauge, to weigh on the market’s Fed bets.

With this, the US 10-year Treasury bond yields dropped in the last four consecutive days to 3.42% at the latest while the two-year counterpart marked a two-day downtrend in the last to 3.97%. Further, the CME’s FedWatch Tool marked nearly 43% market bets on the Fed’s 0.25% rate hike in May, versus 52% expected on Friday.

Hence, softer US data and yields, not to forget receding hawkish calls of the Federal Reserve’s (Fed) next move, weigh on the US Dollar Index (DXY) and allow the Gold buyers to remain hopeful despite the latest retreat.

Softer China PMI, inflation woes fail to stop XAU/USD bulls

While cheering the softer United States data and yields, the Gold price fails to justify downbeat activity numbers from one of the world’s biggest XAU/USD consumers, namely China. That said, China’s Caixin Manufacturing PMI for March drops to 50.0 from 51.6 prior and 51.7 market forecasts. It’s worth noting that the dragon nation’s official activity data flashed mixed readings the previous week as the NBS Manufacturing PMI eased from the previous readings while the Non-Manufacturing PMI came in stronger.

On the other hand, the Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, known as OPEC+, announced a surprise output cut on Monday and renewed inflation fears. However, US President Joe Biden shrugged off the OPEC+ move and said that it is not as bad as you think, which in turn might have allowed the Gold price to remain firmer despite the inflation woes.

United States employment data eyed for Gold price directions

Given the light calendar on Wednesday, Gold price is likely to remain dicey and may witness a corrective pullback in a case where the market sentiment worsens and trigger a rebound in the United States Treasury bond yields, as well as the US Dollar. As a result, headlines surrounding inflation and banking, as well as the US Factory Orders for February, will be crucial to watch for intermediate directions. However, major attention should be given to Wednesday’s US ISM Services PMI, ADP Employment Change and Friday’s Nonfarm Payrolls (NFP) for a better view of the Gold price.

Also read: Gold Price Forecast: On its way to challenge sellers around $2,000

Gold price technical analysis

Despite the latest inaction, Gold price defends the week-start rebound from the 100-bar Simple Moving Average (SMA), as well as keeps the upside break of a one-week-old descending trend line. In doing so, the XAU/USD bulls gear up for battle with the $2,000 horizontal hurdle for one more time.

Given the firmer Relative Strength Index (RSI), placed at 14, and bullish signals from the Moving Average Convergence and Divergence (MACD) indicator, the XAU/USD is likely to cross the aforementioned key hurdle.

Following that, the previous monthly high of around $2,010 and the $2,050 round figure may act as intermediate halts during the likely run-up towards the year 2022 peak near $2,070.

Meanwhile, the 100-SMA precedes three-week-old horizontal support to restrict short-term Gold price downside around $1,950 and $1,935-33.

In a case where the XAU/USD slips beneath the $1,933 support, the $1,900 threshold will precede the 200-SMA support of $1,891 to act as the last defense of the Gold buyers.

Gold price: Four-hour chart

Trend: Further upside expected