- Gold price remains depressed as United States data, geopolitical risk favor US Dollar bulls.
- XAU/USD technical analysis challenge bears by portraying a falling wedge bullish chart formation.
- Federal Reserve Minutes should defend hawkish bias to keep Gold bears hopeful, otherwise 200-SMA hurdle will be in focus.
Gold price (XAU/USD) holds lower grounds near $1,835, following a two-day downtrend, as markets await the key Federal Open Market Committee’s (FOMC) Monetary Policy Meeting Minutes during early Wednesday. That said, the upbeat prints of the United States activity data and the risk-off mood joined firmer US Treasury bond yields to underpin the US Dollar run-up and weighed on the XAU/USD of late.
Gold price drops on upbeat United States data
With the business activity in the United States matching the likes of previously published US inflation numbers, Retail Sales and employment data, the US Dollar got a boost from the statistics, which in turn weighed on the Gold price.
On Tuesday, the preliminary readings of the US S&P Global Manufacturing PMI rose to 47.8 from 46.9 prior and versus 47.3 market forecasts while the Services PMI jumped to the eight-month high to 50.5 compared to 47.2 expected and 46.8 previous readings. As a result, the S&P Global Composite PMI surpassed 47.5 analysts’ consensus and 46.8 previous reading to mark 50.2 figure.
Following the data, the FEDWATCH tool signals that the money market participants see the benchmark level peaking at 5.3% in July, and staying near those levels throughout the year, versus 5.10% expected by the US Federal Reserve (Fed).
Other than the Fed bets, the upbeat US data also propelled the US Treasury bond yields as the benchmark 10-year bond coupon refreshed a three-month high near 3.95% while the two-year counterpart also jumped to the highest levels since early November 2022, to 4.73% at latest.
Hence, upbeat data propels hawkish Fed bets and underpin the US Treasury bond yields and the US Dollar and exerts downside pressure on the Gold price. That said, the US Dollar Index (DXY) snapped a two-day downtrend to regain 104.00 on Tuesday, grinding higher around 104.20 by the press time.
Geopolitical tension also weighs on XAU/USD
Apart from the Federal Reserve-inflicted losses, the Gold price also bears the burden of the escalation of geopolitical tension surrounding China and Russia. The reason could be linked to comments from US Secretary of State Antony Blinken, who said the United States suspects China is considering providing military support to Russia. On the same line are the market concerns of the US-Taiwan trade deal. On the other hand, Russia suspended its nuclear arms treaty with the US and pledged to maintain its military actions in Ukraine.
That said, Russian President Vladimir Putin delivered his state of the nation address to Russia’s Federal Assembly while speaking to both houses of parliament on Tuesday. During the speech, Russian President Putin clearly mentioned, “Our task is to lead our economy to new frontiers,” which in turn highlights further geopolitical tension surrounding Ukraine. On the same line, US Deputy Treasury Secretary Wally Adeyemo said on Tuesday, “US and allies plan new sanctions this week to continue to isolate Russia over the war in Ukraine.”
It should be noted that the geopolitical fears joined the weaker-than-expected earnings forecasts from the major US retailers, namely Walmart and Home Depot, to highlight the risk-off mood and weighed on the Wall Street benchmark. The same favored the rush towards risk safety and propelled US Dollar while also weighing on the Gold price.
Federal Reserve Minutes appear as the key for Gold bears
Although markets position as bearish ahead of the Federal Reserve (Fed) monetary policy meeting minutes, the US central bank appears cautiously optimistic while announcing the latest rate hike worth 0.25%. Hints of the same will be sought for clear directions of the Gold price. Should the policymakers appear ready to talk policy pivot, the XAU/USD may witness a recovery, an absence of which could keep the Gold price weak.
Gold price technical analysis
Gold price keeps grinding inside a three-week-old falling wedge bullish chart formation on the four-hour (4H) play. That said, the looming bear cross on the Moving Average Convergence and Divergence (MACD) indicator keeps sellers hopeful while a steady Relative Strength Index (RSI) line suggests a continuation of sideways performance near the upper line of the stated wedge, which in turn could be risked on the Federal Reserve (Fed) Minutes.
That said, $1,838 is the key level as a break of which will confirm the falling wedge formation and suggest (theoretically) a run-up toward $1,940.
It’s worth noting that the 61.8% Fibonacci retracement level of the metal’s run-up from mid-December 2022 to early February 2023 and the 200-bar Simple Moving Average (SMA), respectively near $1,845 and $1,892, could test the Gold buyers after the confirmation of the bullish chart pattern.
Meanwhile, XAU/USD pullback should aim for January’s low near $1,825 before testing the latest bottom surrounding $1,818.
Following that, the stated wedge’s lower line, close to $1,812 by the press time, could challenge the Gold bears.
Overall, the Gold price remains bearish but the downward trajectory seems to lose momentum and forms a bullish chart pattern, which in turn can trigger a short-term recovery in case fundamentals support.
Gold price: Four-hour chart
Trend: Upside expected