Gold Price Outlook
The price of gold tests the 50-Day SMA ($1855) for the first time since November as it snaps the series of lower highs and lows from the start of the week, and bullion may continue to give back the advance from the January low ($1824) if it struggles to hold above the moving average.
Gold price forecast hinges on response to 50-Day SMA
The price gold trades to a fresh monthly low ($1853) as US Treasury yields climb to fresh monthly highs, and the weakness across precious metal prices may persist as recent remarks from Federal Reserve officials point to higher US interest rates.
During an interview with Wharton Business Radio, Philadelphia Fed President Patrick Harker, a 2023 voting member on the Federal Open Market Committee (FOMC), emphasized that the US interest rate will need to get above 5.00% before the central bank can pause its hiking-cycle.
Harker went onto say that the likelihood for a soft landing is ‘more probable now’ amid signs of disinflation, and it remains to be seen if Fed officials will adjust the forward guidance at the next meeting in March as the central bank is slated to update the Summary of Economic Projections (SEP).
Until then, speculation surrounding the FOMC may influence the price of gold with Chairman Jerome Powell and Co. on course to implement a more restrictive policy, but the update to the US Consumer Price Index (CPI) may encourage the Fed to drop its hawkish tone as the release is anticipated to show another slowdown in inflation.
Looking ahead, both the headline and core CPI are expected to narrow in January, and evidence of easing price pressures may heighten the appeal of gold as the FOMC seems to be nearing the end of its hiking-cycle.
With that said, growing expectations for a looming change in regime may prop up bullion as it largely reflects an inverse relation with US yields, but the price of gold may continue to give back the advance from the January low ($1824) if it struggles to hold above the 50-Day SMA ($1855).
Gold Price Chart – XAU/USD Daily
Chart Prepared by David Song, Strategist; Gold Price on TradingView
- The price of gold snaps the recent series of higher highs and lows to trade to a fresh monthly low ($1853), with bullion testing the 50-Day SMA ($1855) for the first time since November.
- The price of gold may continue to track the positive slope in the moving average as it manages to trade back above $1859 (23.6% Fibonacci retracement), with a break/close above the $1897 (61.8% Fibonacci retracement) opening up the $1928 (23.6% Fibonacci retracement) area.
- However, failure to hold above the moving average may push the price of gold towards the $1837 (38.2% Fibonacci retracement) to $1843 (50% Fibonacci retracement) region, with a move below the January low ($1824) opening up $1812 (61.8% Fibonacci extension).
— Written by David Song, Strategist