Gold Price Forecast: XAU/USD bears lurking after strong US GDP data.

• The price of gold is looking into the abyss with its sights set on the break of $1,900.
• Gold price bears moved in on strong data from the United States of America on Thursday.
• Federal Reserve sentiment is now mixed, supporting the US dollar and US Treasury yields higher.

The price of gold fell to a low of $1,918.69 on Thursday on a generally stronger USD thanks to strong economic data on the day which may prompt the Federal Reserve to keep interest rates higher for longer. The market was wrong to anticipate the ongoing disinflationary figures, which has pushed the dollar to a critical technical level, waiting for the next important data from the US economy.

The dollar recovery comes after the United States of America reported that its fourth-quarter Gross Domestic Product rose 2.9%, above the consensus estimate of a 2.8% increase. Initial claims for jobless benefits also fell more than expected, signaling a tight labor market. The combination of these data has led to the belief that the Federal Open Market Committee will once again be dovish at its meeting next week and soften the rise in interest rates.

Gold in the spotlight

Attention will now turn to the Personal Consumption Expenditure data for Friday, before we head into the week of the Federal Reserve meeting. Pending this data, WIRP suggests a rate hike of the Federal Reserve of 25 basis points on February 1, with less than a 5% chance of a higher increase of 50 basis points. Another 25 basis point rise on March 22 sits at around 80%, while a final 25 basis point rise in the second quarter only reaches 35%. However, these odds are likely to narrow and as a result, the US Dollar Index rose 0.40 points to 102.00 from a low of 101.504. US Treasury yields also rose, raising the opportunity cost of owning gold. The 10-year US bond paid 3.52% for the last time, the maximum of the day.

Technical analysis of the price of gold and the US dollar

In the analysis above, it was stated that the price of Gold was on track to crash should the US dollar break out, given the price placement in the market structure at the time.

The US dollar had been testing the daily trend line resistance as follows:

It was stated that if this were to break, then the gold price would probably head lower with the news scheduled for Thursday and now Friday as the catalyst.

US dollar, DXY, update

The dollar bulls have managed to eat the trend line and this leaves the outlook for the price of gold bearish. However, the dollar bears are attempting to correct within the W formation, so there is prospect of a recovery in the meantime for the gold price ahead of Friday’s key data.

Meanwhile, the price of Gold was in a technically uptrend as follows:

However, in the previous analysis it was stated that the uptrend line of the gold price was vulnerable:

Gold price structures were expected to break out in the coming days as long as resistance held:

A sell-off and gold price capitulation would leave prospects for a test towards $1,900.

Gold Price Update

Bears have broken the trend line after the move to the highs and have subsequently moved into the horizontal structure that holds a move lower to test the upside commitments above $1,900.