At the beginning of this week's trading, XAU/USD gold futures settled higher, as the US dollar gave up its gains against most of its major rivals. This is during expectations that the Federal Reserve will slow down the pace of policy tightening. XAU/USD gold price gains extended to the $1881 resistance level, the highest for gold price since May 2022. The price of gold is stable around the level of 1870 dollars an ounce at the time of writing the analysis.
Last week's data showed a contraction in US services sector activity in December, raising expectations that the Federal Reserve will slow the pace of interest rate hikes. Investors are now looking forward to Federal Reserve Chairman Jerome Powell's speech at a central bank conference in Stockholm on Tuesday and the US December inflation report due on Thursday for additional clues about the interest rate outlook.
US monetary policy
Atlanta Federal Reserve Chairman Rafael Bostick said the US central bank should raise US interest rates above 5% by early second quarter and then hold off "for an extended period." "We just have to keep our resolve," he told the Atlanta Rotary Club on Monday. Bostick said the Fed is committed to tackling high inflation and this ensures raising interest rates to a range of 5% to 5.25% to remove excess demand from the economy. When asked how long he'd seen rates above 5%, Bostick said, "Three words: a long time." and “I am not a pivotal man. I think we should pause and stop there and let the politics work.”
The comments echoed comments Bostic made on Friday.
Fed officials raised US interest rates by half a point in December, extending their aggressive tightening campaign and bringing the target on the benchmark interest rate to the target range of 4.25% to 4.5%. The move followed four larger hikes of 75 basis points to curb inflation well above their 2% target. Policymakers say their next interest rate move will be determined by economic data, including inflation and employment reports. The officials will meet on January 31 and February 1.
Labor Department data released on Friday showed that the US economy added 223,000 jobs in December and the country's unemployment rate fell to 3.5%. Meanwhile, wage growth has slowed, supporting prospects for a soft landing for the US economy, as the Fed manages to calm inflation while reducing pain in the labor market. Average hourly earnings in the US rose 0.3% in December from the previous month and 4.6% from December 2021 - both lower than expected.
XAU/USD gold price forecast today:
- XAU/USD gold price is still in an upward trend, as long as it is stable above the psychological resistance at $1800 an ounce.
- The recent bullish rebound gains moved the technical indicators towards overbought levels.
- The bulls will have an opportunity to move towards the next psychological top at $1900 an ounce, if the pressure continues on the US dollar.
On the other hand, and for the same period of time, the bears will have some momentum in the event that the gold price is exposed to profit-taking sales and returns to the vicinity of the support levels of 1825 and 1775 dollars, respectively.
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