- Gold price remains on track to attack the previous week’s low at $1,911.
- US Federal Reserve begins its two-day policy meeting; Gold bulls stay on the defensive.
- Gold price could see extended correction on repositioning ahead of the key United States events.
Gold price has reversed early recovery gains and remains on the defensive near $1,920 this Tuesday. The United States Dollar (USD) is looking to build on the previous upswing as risk-off flows return amid anxious markets ahead of the key central banks’ policy announcements this week.
United States data eyed ahead of the Federal Reserve
Investors have turned cautious and refrain from placing fresh directional bets on the Gold price as the US Federal Reserve (Fed) kicks off its two-day monetary policy meeting later this Tuesday. The Federal Reserve is widely expected to hike the rates by 25 basis points (bps) at the February meeting. But industry experts now believe that the Federal Reserve could turn out far less dovish than previously thought, in light of the above-expectations United States Gross Domestic Product (GDP). Should the US central bank provide any hints on a potential pause in its tightening cycle, it could offer the much-needed lift to the non-interest-bearing Gold price. However, Federal Reserve Chairman Jerome Powell’s words will hold the key to the next Gold price direction.
In the meantime, traders will look forward to the Federal Reserve’s closely watched Employment Cost Index (Q4) and the Conference Board Consumer Confidence data for fresh cues on the health of the United States economy. The United States Employment Cost Index is seen easing to 1.1% in Q4 2022 vs. 1.2% booked in the third quarter.
Risk-off flows return despite strong China PMIs, IMF forecasts
Risk aversion seeps back into the markets early Tuesday, reflective of the south turn in the US S&P 500 futures, as investors digest the latest global economic outlook unveiled by the International Monetary Fund (IMF) alongside China’s Manufacturing and Services PMI data, published by the country’s National Bureau of Statistics (NBS). China’s NBS Manufacturing PMI rose to 50.1 versus 49.7 expected and 47.0 prior, whereas the Non-Manufacturing PMI also came in at 54.4 figure compared to 51.0 expected and 41.6 previous reading.
Meanwhile, the International Monetary Fund raised its global growth estimates, adding that the emerging markets’ growth slowdown bottomed out in 2022. “The global lender also stated that estimates come with the backdrop of a slight increase in the 2023 global growth outlook helped by “surprisingly resilient” demand in the United States and Europe, an easing of energy costs, and the reopening of China’s economy after Beijing abandoned its strict COVID-19 restrictions,” FXStreet’s Analyst Anil Panchal explains.
Gold price technical analysis: Daily chart
Gold price remains in consolidation, confirming a rising wedge breakdown last Thursday. Gold bulls have found support near the $1,915 region heading into the all-important US Federal Reserve two-day policy meeting.
With the 14-day Relative Strength Index (RSI) inching slightly higher, risks remain skewed to the upside in the near term. But Gold buyers need to reclaim the $1,935 hurdle, at first, to end the corrective downside.
The next critical resistance is seen at the $1,950 psychological level, above which the wedge confluence at $1,959 will be the level to beat for Gold bulls.
Having witnessed a fakeout to the upside from a rising wedge formation on Tuesday, bears took charge and triggered a corrective decline in the Gold price on Friday.
Alternatively, a sustained move below the abovementioned support, near $1,915, will expose the previous week’s low at $1,911.
The final threshold for Gold buyers to defend remains the $1,900 level should the correction regain traction. The bullish 21-Daily Moving Average (DMA) hangs around at that level.