Gold Price Forecast: XAU/USD stays firm above $2020 following Fed’s pivot

• Gold’s rally was halted shy of hitting $2050, as long book profits ahead of Friday’s session.
• The main driver was the Fed’s dovish pivot, which opened the door for US Dollar weakness.
• However, the Fed remains data dependent, and solid data could refrain them from easing policy.

Gold price sees green, though it has retreated somewhat after reaching a new weekly high of $2047.91, clings to gains of 0.15%, and trades at around $2030.20 a troy ounce after hitting a daily low of $2024.37.

Fed Chair Powell lack of pushback to underpin Gold prices

On Wednesday, the Federal Reserve surprised the markets by adopting a dovish stance despite holding rates at the 5.25%-5.50% range. In the monetary policy statement, officials said the labor market is cooling, growth moderating, and inflation is getting lower, but emphasized that it’s elevated. Even though, the statement presented a neutral stance, the Summary of Economic Projections (SEP), did not.

Firstly, the SEP announced the Fed finished its tightening cycle. Second, policymakers foresee three rate cuts in 2024, half of what the markets had priced in for the next year, while inflation revises downward. In addition, they revised GDP from 2.1% to 2.6% in 2023, and the Unemployment Rate stood at 3.8%, unchanged from its previous revision.

That said, US Treasury bond yields have plunged sharply. For example, the 10-year benchmark note is down 45 basis points, at 3.932%, while the 2-year, the most sensitive to interest rate adjustments, has fallen 35 basis points, to 4.382%.

Consequently, the US bond yields' direction is undermining the Greenback, which has fallen to four-month lows at 101.77 but has trimmed some losses, down 0.88% at 101.99.

Fed Chair Jerome Powell’s failure to push back against overly priced rate cuts gave investors the perfect excuse to increase bets that the US central bank would be forced to ease policy more than they projected, despite Powell and Co. keeping the door open for additional rate hikes.

On the data front, US Retail Sales exceeded forecasts and sponsored a slight recovery for the Greenback. At the same time, American filling for unemployment claims and the previous week’s report were lower than expected, suggesting the labor market remains tight.

Ahead on the week, the US calendar will feature S&P Global Flash PMIs for December, the Industrial Production for November, and the NY Fed Empire State Manufacturing Index.

XAU/USD Price Analysis: Technical outlook

Gold’s remain upward biased, but if Thursday’s price action prints an inverted hammer, that could open the door to form an ‘evening star three candle pattern,’ a bearish pattern. In that outcome, sellers could test support levels like the October 27 high at $2009.42, ahead of the $2000 figure. Further downside is seen at the 50-day moving average (DMA) at $1974.78.