Gold Price Forecast: XAU/USD flirts with $2,020 as USD strength persists

XAU/USD Current price: 2,023.15

• Continued upward pressure in government bond yields underpins the US Dollar.
• Upbeat United States data further weighed on March rate cut odds.
• XAU/USD retreated further on broad US Dollar’s strength, returned to its comfort zone.

XAU/USD is under strong selling pressure on Monday amid broad US Dollar’s strength. The Greenback extends the rally triggered last week by the United States (US) Federal Reserve (Fed) monetary policy decision and upbeat employment figures. On the one hand, Fed Chair Jerome Powell dismissed the odds for a March rate cut, spurring risk aversion. On the other hand, the Nonfarm Payrolls (NFP) report was much stronger than expected, further diminishing the chance of a soon-to-come rate cut.

At the beginning of the new week, government bond yields resumed their advances, underpinning the US Dollar in a much quieter week regarding macroeconomic releases. At the time of writing, the 10-year Treasury note offers 4.16%, up roughly 14 basis points (bps), while the 2-year note yields 4.47%, up 10 bps from Friday’s close.

Meanwhile, stock markets changed course. After spending most of the day in the green, European indexes ended the day in the red. As per Wall Street, the three major indexes trade firmly in the red, with the Dow Jones Industrial Average being the worst performer, down roughly 1%.

Finally, the USD got an additional boost from upbeat local data. The ISM Services Producer Manager Index (PMI) jumped to 53.4 in January from a downwardly revised 50.5 in December, above the expected 52. On a negative note, “The Prices Index registered 64 percent in January, a 7.3-percentage point increase from December’s seasonally adjusted reading of 56.7 percent,” a red flag on inflation, yet supportive of the delay in rate cuts.

XAU/USD short-term technical outlook

The daily chart for the XAU/USD pair now offers a neutral stance as it returned to the $2,020 price zone. In the mentioned chart, the pair is currently developing below a flat 20 Simple Moving Average (SMA), providing near-term resistance at $2,029.90. XAU/USD holds well above a bullish 100 SMA, limiting the longer-term bearish potential, although the Relative Strength Index (RSI) indicator heads firmly south at around 47, anticipating another leg lower.

In the near term, and according to the 4-hour chart, the risk skews to the downside. Gold develops below all its moving averages, and the 20 SMA accelerated south, although still holding above directionless longer ones. Technical indicators, in the meantime, have bounced from near oversold readings, aiming north within negative levels, not enough to confirm an upcoming recovery.

Support levels: 2,022.75 2,009.10 1,988.90

Resistance levels: 2,029.90 2,039.60 2,053.10