Gold Price Forecast: XAU/USD teases sellers amid sluggish yields, Federal Reserve’s favorite inflation eyed

  • The price of gold is still under pressure after breaking a four-week rise.
  • Despite conflicting news, US Treasury bond yields are still under pressure.
  • Banking news and the US Core PCE Price Index are watched for XAU/USD trends.a

The price of gold (XAU/USD) fluctuates between $1,975 and $1,977 while remaining within a symmetrical triangle that has been in place for one week. As a result of the market’s cautious optimism and the negative United States Treasury bond yields, the precious metal widens the previous week’s losses, the first in four.

Gold pricing anticipates additional decline as yields halt earlier decline
For the second day in a row, the price of gold is under pressure as US Treasury bond yields lick their wounds near recent lows of five months. The standard US 10-year Treasury bond yield, however, fluctuates at 3.378%, while its two-year counterpart attracts bids and posts modest intraday increases of about 3.797%. It’s important to note that in the most recent week, rates fell to their lowest levels since September 2022 as investors flocked to bonds and gold out of fear of a banking meltdown.

easing banking difficulties and investigating XAU/USD traders
Bloomberg’s reporting on the Silicon Valley Bank (SVB) over the weekend seems to have delayed the instability in the banking industry. According to persons familiar with the situation, First Citizens BancShares Inc. is in advanced talks to acquire Silicon Valley Bank following its bankruptcy earlier this month. Neel Kashkari, president of the Minneapolis Fed, made remarks along the same lines in which he raised concerns about a potential US recession and restrained calls for further rate increases by the US central bank.

It is important to keep in mind, nevertheless, that the mixed US data and remarks from Federal Reserve (Fed) officials who were once hawkish have an impact on the price of gold. Yet, compared to January’s decline of 5% (updated from -4.5%) and the market expectation of a gain of 0.6%, durable goods orders fell by 1.0% in February. Data indicated that although the number for Nondefense Capital Goods Orders ex Aircraft came in firmer-than-expected 0.0% to 0.2%, compared to 0.3% previously, it was also negative for Durable Goods Orders ex Defense and ex Transportation. The US S&P Global PMIs for March showed preliminary readings that were firmer than expected. The manufacturing indicator increased to 49.3 from 47.3 in February, versus an expectation of 47.0, while the services PMI increased to 53.8 from 50.6 in February, versus an expectation of 50.5. As a result, the S&P Global Composite PMI rose to 53.3 from 50.1 in February, beating the market expectation of 50.1.

Raphael Bostic, president of the Atlanta Federal Reserve, said in another interview with NPR that raising the policy rate was not an easy choice but that he does not anticipate a recession. In addition, policy hawk James Bullard, president of the St. Louis Federal Reserve, stated on Friday that the response to the bank stress was prompt and appropriate, allowing the monetary policy to concentrate on inflation. The policymaker also mentioned that the predictions call for one more rate increase, which might occur at the upcoming FOMC meeting or shortly thereafter.

Gold prices are affected by geopolitical concerns and worry about the Fed’s favoured inflation gauge.
The move of Russian nuclear weapons towards Belarus, in addition to the aforementioned catalysts, adds to the cautious atmosphere ahead of the Fed’s preferred inflation data, the Core Personal Consumption Expenditure (PCE) Price Index for February, which also weighs on the price of gold.

After the Russian president’s declaration that he intended to install tactical nuclear weapons in Belarus the previous day, the North Atlantic Treaty Organization (NATO) on Sunday chastised Putin for his “dangerous and reckless” nuclear rhetoric. The Financial Times (FT) also raises concerns about slowing economic growth in China by citing Maersk, one of the largest shipping companies in the world. Reducing growth optimism drags on the price of XAU/USD because the dragon nation is one of the top users of Gold.

On the other side, the US Core PCE Price Index is anticipated to ease in February, thus the most recent dip could be the start of an upsurge following the anticipated softening of US inflation indications.

technical study of the gold price
Following the interruption of a three-week rise, the price of gold oscillates inside a brief triangular pattern. It’s important to note that the lower highs of the XAU/USD price correspond to the lower peaks of the Relative Strength Index (RSI) line, which is currently at 14, indicating that the quotation may yet decline further. The most recent bearish signal from the Moving Average Convergence and Divergence (MACD) indicator strengthens the downside bias.

However, the lower line of a stated triangle, which is currently near $1,960, limits the short-term decline in the price of gold. The 50-bar Simple Moving Average (SMA) near $1,955 is another obstacle for the XAU/USD bears.

The possibility of a decline towards the 50% Fibonacci retracement of the XAU/USD upside from late February to March 20, near $1,906, cannot be ruled out should the Gold price breach the $1,955 support level.

The Gold buyers might also come back if the resistance line of the aforementioned triangle, which is at $2,003 at the latest, is cleared to the upside. Even so, the XAU/USD bulls may use the high reached on March 10, 2022, around $2,010, as a further check before aiming for the previous yearly high close to $2,070.

Overall, the bulls seem to be losing track of the Gold price, but the bears need support from $1,955 in order to recover power.