XAU/USD (gold) futures struggled to maintain their highest levels in eight months as a stronger US dollar and higher US Treasury yields weighed on the precious metal's gains. But gold prices in general will be watching this week's US inflation report, which may give investors hope that the US central bank will start tapering its quantitative tightening program (QT).
Gold prices rose towards the $1885 resistance level, at the time of writing the highest price analysis in eight months. In the first week of trading in 2023, gold prices rose by about 3%. Since last November, the price of gold has risen by more than 12%.
Silver, the sister metal to gold, fell below $24 on Tuesday. All in all, the price of the white metal had a slow start to 2023, falling nearly 2%.
In general, the gold price found support due to the weakness of the US dollar in the early days of the new year 2023. The US Dollar Index (DXY), which measures the performance of the US currency against a basket of other major currencies, is down 0.2% so far this year. On Tuesday, the dollar index rose 0.3% to 103.31 from an opening of 103.00. A weaker dollar is beneficial for dollar-denominated commodities because it makes them cheaper for foreign investors to buy.
The overall US bond market yield rose, with the 10-year yield rising 1 basis point to 3.617%. One-month bond yields rose 2.7 basis points to 4.269%, while 30-year yields increased 9.8 basis points to 3.748%. The spread indicating recession between 2-year and 10-year yields has widened to approximately -65 basis points.
In general, the markets were reacting mainly to the Federal Reserve and its rate path. According to the CME FedWatch Tool, most financial markets are set for a 25 basis point increase at the upcoming policy meeting of the Federal Open Market Committee (FOMC). The price of gold is sensitive to a rising price environment, so any easing of the hawkish stance would be beneficial for the precious metal, mainly because it would reduce the opportunity cost of holding non-yielding bullion.
Currently, all focus is on upcoming key economic data, including inflation, which is expected to slow to less than 7%.
In some exciting industry news, the People's Bank of China bought 30 metric tons of gold, following a recent trend of central banks buying the metal asset amid growing recession fears. As for other metal commodity prices, copper futures rose to $4.077 a pound. Platinum futures fell to $1088.60 an ounce. Palladium futures fell to $1,773.50 an ounce.
Gold Forecast:
As I mentioned before, the general trend of the gold price will remain bullish as long as prices are above the psychological top of $1800 an ounce. This week's gains increased the expectations of moving towards the next psychological top of 1900 dollars an ounce, and this may happen unless the US dollar gets momentum from US inflation figures this week. Conversely, the XAU/USD price may be exposed to quick profit-taking sales in the event that US inflation figures favor tightening US Federal Reserve policy. As the technical indicators moved towards overbought levels after the recent gains.
A breach of the current XAU/USD gold price trend will not occur without moving toward the support level of 1825 and 1790 dollars, respectively.
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