Gold Prices Forecast: Powell’s Speech to Steer XAU/USD

Highlights

• Gold retreats with bond yield rise
• Jobs data fuels rate hike pause bets
• Powell’s speech pivotal for gold trend

Gold Prices Retreat as U.S. Yields Climb

Spot gold (XAU/USD) dipped on Monday with an uptick in U.S. bond yields, anticipating Federal Reserve Chair Jerome Powell’s upcoming remarks to shed light on the interest rate trajectory. Gold’s shimmer waned, dropping 0.51% to $1,982.65 per ounce early in the day, after breaching the $2,000 threshold last week. Concurrently, U.S. gold futures saw a 0.45% decrease to $1,990.10.

Yield Influence and Support Levels

The immediate fate of gold hinges on the movements of U.S. 10-year Treasury yields. A resurgence in yields suggests potential for gold to fall beneath the crucial support of $1,969.91. Following a five-week low, the 10-year yield climbed to 4.5910%, diminishing gold’s allure as yields detract from the appeal of non-yielding assets like bullion.

Labor Market Data and Rate Hike Speculation

A softer-than-expected jobs report catalyzed speculation that the Fed’s rate hikes might pause, pushing the dollar to a six-week trough. Employment growth decelerated in October, with wages posting the mildest year-on-year climb in over two years, hinting at a cooling labor market. Market participants now see a high likelihood of rates holding steady in December, with anticipations of policy easing by mid-year.

Fed Speeches and Rate Path

The week is rife with speeches from at least nine Fed officials, including Chair Powell. Despite maintaining rates this past week, the Fed has not ruled out future hikes. This strategic ambiguity keeps investors on alert for definitive signs of a shift in monetary policy.

ETF Dynamics and Gold’s Outlook

The SPDR Gold Trust reported a slight increase in holdings, reflecting a short-covering trend among speculators. Analysts at ANZ, noting the ETF’s rise, underscored the critical dependency of gold prices on the Fed’s interest rate decisions. As Powell’s speech nears, the financial world watches with bated breath, weighing each clue on gold’s future course.

Short-term Forecast

Gold’s short-term outlook hinges largely on upcoming Federal Reserve communications.

With traders pricing in high chances of the rate hike cycle pausing, and potentially shifting to easing by mid-2023, the immediate trajectory for gold appears cautiously bullish. However, any resurgence in U.S. Treasury yields or unexpected hawkish cues from Fed speeches could undermine this optimism, potentially pressuring gold to test the key support level near $1,969.91.

Hence, while the near-term sentiment leans towards bullish, it remains delicately balanced against pivotal economic indicators and central bank signals.

Technical Analysis

The current daily price of gold is trading below the previous close, indicating a slight pullback in the market. Despite this dip, the price remains above both the 200-day and 50-day moving averages, suggesting a general bullish trend over the medium to long term.

With the price nestled between minor support at 1952.21 and minor resistance at 1987.00, there’s room for fluctuations within this range. The proximity to key moving averages and the recent retraction from a higher close could imply that bullish sentiment is under pressure, yet the dominant trend still leans positive.