Gold Price Forecast: XAU/USD retreat needs validation from $1,977 and Purchasing Managers Indexes

• Gold price remains pressured after retreating from multi-month high.
• US Dollar rebound prods XAU/USD bulls ahead of Purchasing Managers Indexes for April.
• Hawkish Federal Reserve talks, resilient United States data underpin US Dollar’s corrective bounce.
• Challenges to US Dollar, upbeat catalysts from China keep Gold buyers hopeful.

Gold price (XAU/USD) stays defensive around $2,000, following the previous day’s heavy losses, the first in four day, which called for a weekly negative closing amid a corrective bounce in the United States Treasury bond yields and the US Dollar. That said, Friday’s mostly upbeat US data and hawkish Federal Reserve (Fed) talks prods the market’s interest in the XAU/USD amid receding dovish bets on the US central bank’s next move. However, this week’s preliminary readings of April’s Purchasing Managers Indexes (PMIs) from the key economies should be watched carefully for clear directions.

Gold price eases as US Dollar, yields recover

Gold price slips from the buyer’s radars after the United States Treasury bond yields and the US Dollar managed to witness a positive close to the week after multiple days of downturn.

That said, the US 10-year and two-year Treasury bond yields gained nearly 3.0% on the week while ending Friday’s North American trading session around 3.53%% and 4.10% respectively. Following that, the US Dollar Index (DXY) also snapped a three-day south run and bounced off the lowest level in a year to 101.58 at the latest.

United States data, Federal Reserve talks prod XAU/USD bulls

While tracing the latest rebound in the US Treasury bond yields and the US Dollar, the United States statistics and comments from the Federal Reserve (Fed) officials gain major attention.

On Friday, US Retail Sales dropped by 1.0% for March versus -0.4% expected and -0.2% prior. On the contrary, Industrial Production grew by 0.4% during the stated month compared to 0.2% market forecasts and prior reading. Additionally positive was the preliminary reading of the University of Michigan's (UoM) Consumer Confidence Index for April which improved to 63.5 versus 62.0 analysts’ expectations and previous readings. Furthermore, Year-ahead inflation expectations rose from 3.6% in March to 4.6% in April while its Five-year counterpart reprinted 2.9% for the said month.

“The recent developments are consistent with one more rate hike,” said Atlanta Federal Reserve (Fed) President, Raphael Bostic in an interview with Reuters this Friday. On the same, Fed Governor Christopher Waller mentioned that the recent data show that the Fed hasn't made much progress on its inflation goal and added that rates need to rise further, per Reuters.

However, Federal Reserve Bank of Chicago President Austan Goolsbee said in an interview with CNBC on Friday that he still wants to see the data. The policymaker also added, “But let's be mindful we've raised a lot; some of the lag is coming through possibly in today's retail sales number."

Given the resilient data and the Fed policymakers’ hesitance of being dovish, the market’s bets for the 0.25% Fed rate hike in May increased. That said, the traders also push back the expectations of a rate hike during the current year.

As a result, the Gold price run-up pauses near the multi-month high and challenges the bulls of late.

Challenges for US Dollar, absence of hawkish Fed bias keep Gold buyers hopeful

Despite the recent rebound in the US Dollar and yields, which in turn weighed on the Gold price, there are standing challenges for the greenback in the form of its reserve currency status, as well as surrounding the Fed, which in turn keeps the Gold buyers hopeful. That said, Russia’s liking for the Chinese Yuan and Brazil’s preference for using a separate currency for foreign trade, not to forget China’s push for its currency, check the US Dollar price of late.

Elsewhere, the easing fears of the recession and an absence of fresh banking negatives also weigh on the Gold price and allow the US Dollar to rebound. However, these concerns are ephemeral and are without any confirmation amid the looming threat of an economic slowdown, which in turn tests the USD bulls.

Furthermore, the odds of witnessing a pause in the Federal Reserve’s rate hikes trajectory are still high and weigh on the US Dollar, which in turn hints at the XAU/USD rebound.

Purchasing Managers Indexed eyed

Moving on, the Gold traders may witness a light calendar and can adhere to consolidation in the XAU/USD price. However, the downbeat prints of the preliminary readings of April’s Purchasing Managers Indexes (PMIs) may renew recession woes and can weigh on the US Treasury bond yields and the US Dollar, which in turn can recall the Gold buyers.

Also read: Gold Price Weekly Forecast: XAU/USD could extend correction before next leg higher

Gold price technical analysis

Gold price remains pressured inside a one-month-old ascending trend channel, following its U-turn from the channel’s top line the previous day. In addition to the pullback from the stated channel’s resistance line, bearish signals from the Moving Average Convergence and Divergence (MACD) indicator also tease the XAU/USD sellers.

That said, the 100-bat Simple Moving Average (SMA) prods Gold price’s immediate declines ahead of the aforementioned channel’s bottom line, close to $1,977 at the latest.

Should the XAU/USD drop below $1,977, the odds of its fall towards the early March swing high around $1,860 can’t be ruled out. However, the 200-SMA level of around $1,937 and the $1,900 round figure may check the Gold price on its south run.

Meanwhile, the 61.8% Fibonacci Expansion (FE) level of the Gold price moves between March 09 and 21 joins the previously mentioned channel’s top line to highlight the $2,048 as the key upside hurdle for the XAU/USD bulls to cross to retake control.

Following that, the previous yearly high of $2,070 and the all-time peak of the Gold price, near $2,075, will precede the 78.6% FE level of around $2,080 to act as additional upside filters for the XAU/USD bulls to watch.

Overall, the Gold price runs out of steam for further upside but the bears need validation from $1,977 to retake control.

Gold price: Four-hour chart

Trend: Limited downside expected