Gold Weekly Forecast: USD to Guide Breakout/Reversal at $1,830
- This week, the 10-year US Treasury yield fell from a two-year high, sending gold higher.
- It appears that $1,830 has formed the main resistance level for XAU/USD.
- This week will not see any important data releases in the US economy.
The weekly forecast for the gold shows that the bulls have run out of steam as sellers manage to protect the key $1,830 level.
As the new week began, gold rose to $1,800. In the second half of the week, the precious metal went into a consolidation phase after clearing this key resistance area.
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Despite a lack of official data, markets remained relatively calm on Monday. However, the dollar managed to find demand when Richmond Federal Reserve Bank President Thomas Barkin told the Wall Street Journal that a rate hike in March was imminent.
However, the dollar faced strong selling pressure during the hearings regarding the FOMC Chairman’s candidacy on Tuesday, which resulted in a sharp increase in the XAU/USD pair. Powell said they would need to hold up to four policy meetings to reduce the balance sheet. After December minutes revealed some policymakers had begun rebalancing after the first rate hike, the comment forced the US dollar index to cut back on gains. Powell added that they may try to cut the number later in the year.
According to the US Bureau of Labor Statistics, the consumer price index (CPI) rose 7% y/y in December. As a result of this pressure, the dollar lost interest as investors overestimated how aggressively the Fed would tighten monetary policy. Furthermore, the annual Producer Price Index (PPI) fell to 9.7% from 9.8% in November, adding even more bearish pressure to the dollar.
Key events/data for gold next week
Next week, there are no high-level data releases on the US economy, and investors may be nervous about a less aggressive Fed tightening before the Jan. 26-27 monetary policy meeting. FOMC members will not be able to discuss policy either during the Fed’s shutdown period that begins on Saturday, January 15. As a result, market participants will closely monitor the yield on US Treasury bonds.
On Monday, China will release its gross domestic product (GDP) figures for the fourth quarter. Risk aversion may limit gold’s gains if this report indicates a slowdown in the world’s second-largest economy.
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Gold weekly technical analysis: Bulls pause ahead of $1,831
Gold price reversed the gains from ultimate resistance of $1,831. However, the price is still above the key support of $1,800. The convergence of 20 and 50 days SMAs around $1,810 may offer mild support at the moment.
The price is moving within an uptrend channel, and the market participants are largely waiting for a clear breakout. Meanwhile, the volume data shows more strength for the bears.
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