Gold Price Forecast: XAU/USD advances towards $1,905, despite US yield failure and USD weakness

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  • Gold points towards $1,900.
  • New York’s Empire State Manufacturing Index slumped, raising expectations of a Fed turnaround.
  • Gold Price Preview: An evening star candlestick pattern suggests further declines are in store.

the price of gold Pull back from daily highs near $1,920 and dip below the $1,910 signal, targeting $1,900 amid risk aversion momentum. Despite the US dollar (USD) continuing to trade at a loss and US Treasury yields flattening, non-yielding metals are losing traction. At the time of writing, XAU/USD is trading at $1,906.69.

Gold remains on the defensive, despite a USD offered

Risk aversion is the name of the game as US stocks fell. US corporate profits are one reason for a subdued mood. US economic data published by the New York Federal Reserve (Fed) showed a worsening of manufacturing activity and business conditions. Speculation about a possible Fed turnaround has improved, with traders expecting a 25 basis point rate hike in the February 1 decision.

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Regarding the latter, sources quoted by Bloomberg commented: “The Fed will have reached its terminal federal funds rate in the first quarter, and investors can begin to react to incoming data without the lens of what the best news will mean for Policy Monetary. Good news for the economy can become good news for the markets.”

Apart from this, the dollar index, which measures the value of the dollar against a basket of six currencies, lost 0.12%, trading at 102,440. The 10-year Treasury yield stands at 3.533%, almost unchanged and on par with previous losses.

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US release that manufacturing activity in New York plunged to its lowest level in January, with a sharp contraction in business activity, and the index fell 22 points to -32.9. The Inform showed that new orders and shipments decreased substantially, while delivery times remained unchanged and inventories rose.

What must be considered?

On Tuesday, the US economic agenda will be led by the President of the New York Fed, John Williams, who will cross the news. On Wednesday, the calendar will include Retail Sales, Prices Paid by Producers (PPI) and new statements from the Fed.

Gold Price Forecast: Technical Perspective

From a technical perspective, the daily chart of the XAU/USD shows the formation of a three candlestick chart pattern known as the evening star. Price action on Monday formed a doji, followed by Tuesday’s drop to $12. However, a daily close around $1,905 or below is needed to confirm the validity of the pattern, which suggests that the yellow metal could push for a break below $1,900.

If this scenario is fulfilled, the first support for XAU/USD would be at $1,900. A break of the latter would expose last Friday’s low of $1,892.40, followed by the January 11 high of $1,886.63 and $1,870.

Source: Fx Street

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