Forex News

08:32:14 29-11-2022

Gold Price Forecast: XAU/USD rebound needs validation from China Covid conference, Federal Reserve talk

  • Gold price picks up bids to reverse the previous day’s losses amid cautious optimism in the financial markets.
  • Easing in China Covid numbers, efforts to defend reality sector join downbeat US Dollar to favor Gold buyers.
  • Lackluster yields of United States Treasury bonds, mixed comments from Federal Reserve officials challenge XAU/USD upside.
  • Bull cross on the hourly chart, hopes of more positives from China signal further upside of Gold price.

Gold price (XAU/USD) picks up bids to reverse the previous day’s loss, the heaviest in a week, around $1,755 during early Tuesday morning in Europe. The yellow metal’s latest gains could be linked to the mildly positive sentiment in the global financial markets, mainly led by upbeat headlines from China. However, anxiety ahead of the key events restricts the Gold price upside as of late.

China renews market’s optimism and favors Gold price

China’s daily covid infections dropped from an all-time high of 40,347 to 38,645, as per the latest official readings conveyed by Reuters. This also joins the upbeat performance of Chinese equities as the national securities regulator lifted a ban on equity refinancing for listed property firms, per Reuters. “The China Securities Regulatory Commission (CSRC) said late on Monday it would broaden equity financing channels, including private share placements for China and Hong Kong-listed Chinese developers, lifting a ban that has been in place for years,” mentioned the news.

While portraying the mood, the US stock futures and equities in the Asia-Pacific region print mild gains despite the downbeat performance of Wall Street. The same exert downside pressure on the US Dollar’s safe-haven demand and favor the Gold price upside.

United States Treasury bond yields struggle amid mixed Federal Reserve signals

Although the overall tone of the US Federal Reserve (Fed) officials appeared positive, individual comments didn’t rule out the need for softer interest rate hikes and hence failed to propel the US Treasury bond yields.

Richmond Federal Reserve Bank President Thomas Barkin recently mentioned that he supports smaller interest-rate hikes ahead as the central bank moves to bring down too-high inflation. Previously, Cleveland Fed President Loretta Mester marked the need to see several more good inflation reports and more signs of moderation to back the pause in rate hikes. On the same line, St. Louis Fed President James "Jim" Bullard stated that the situation calls for much higher interest rates than what we've been used to. Further, New York Federal Reserve Bank President John Williams said that he believes the Fed will need to raise rates to a level sufficiently restrictive to push down on inflation and keep them there for all of next year. Additionally, Fed Vice Chair Lael Brainard advocated for tighter monetary policy while citing risk-management reasons.

That said, the benchmark US 10-year Treasury yields remain sidelined near 3.70% so far during the current week, after posting a three-week downward trajectory.

It’s worth noting that the US Dollar weakness gains momentum amid sluggish Treasury bond yields. That said, the US Dollar Index (DXY) drops 0.40% intraday to 106.25 by the press time, which in turn favors the XAU/USD bulls.

China Covid Conference, Federal Reserve signals will be key for XAU/USD traders

Having witnessed the much-needed easing in the Coronavirus numbers, Chinese authorities are up for conveying COVID prevention and control measures at 3 p.m. (07:00 GMT) on Tuesday. The same could help the Gold price to gain more strength in case of a positive outcome.

Additionally, comments from the Fed policymakers may also help the XAU/USD bulls to keep the reins in a case where the easy rate hikes are chatters.

It should be noted that Federal Reserve (Fed) Chairman Jerome Powell is up for his first public appearance since November’s Federal Open Market Committee (FOMC) meeting and could propel the XAU/USD if he reiterates the bearish bias.

Gold price technical analysis

Gold price grinds higher as bulls poke the 38.2% Fibonacci retracement of the bullion’s upside between November 09 and 15.

The upside momentum also takes clues from the bullish Moving Average Convergence and Divergence (MACD) indicator, as well as the firmer Relative Strength Index (RSI), placed at 14.

It’s worth noting that the 50-Hour Moving Average (HMA) aims to pierce the 200-HMA and confirm a “Bull Cross”, which in turn keeps the Gold buyers hopeful.

However, a one-week-old descending trend line near $1,763 and the monthly peak near $1,786 could challenge the short-term Gold price upside ahead of the $1,800 threshold.

On the flip side, a clear break below the area comprising the 50-HMA and the 200-HMA, surrounding $1,750, holds the key to the gold seller’s entry.

Following that, the latest swing low and the 61.8% Fibonacci retracement, also known as the “Golden ratio”, could lure the XAU/USD bears to aim for $1,739 and $1,734 levels respectively.

Gold price: Hourly chart

Trend: Further upside expected


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