Gold Price Forecast: XAU/USD erases Wednesday’s gains and falls below $1,920

• Gold slumps across the board, despite falling US Treasury yields.
• The dollar recovered some ground, bolstered by the fall in the euro and sterling.
• On Wednesday, the US Federal Reserve raised rates 25 basis points, signaling that it is about to end its cycle.
• Following the lead of the US central bank, the Bank of England and the ECB raised rates by 50 basis points.

the price of gold It falls back after hitting a nine-month high of $1,959.74. However, it is below the $1,950 barrier after the US Federal Reserve (Fed) raised rates by 25 basis points on Wednesday. The data published in the economic agenda of the United States showed that the labor market continues to resist. In addition, two other central banks, the Bank of England (BoE) and the European Central Bank (ECB), joined the chorus of tightening monetary policy. At the time of writing, XAU/USD is trading around $1,920, below its opening price.

The US Federal Reserve raised rates but sounded dovish

Walk Street is set to extend its Wednesday gains after Jerome Powell & Co. raised rates. Powell said the “disinflation process has begun,” giving the green light to risky assets, extending his recovery as Powell spoke.

The dollar benefits from the fall of the euro and the pound, a headwind for gold

Meanwhile, the dollar index (DXY), which measures the value of the dollar against a basket of currencies, pared some of its losses and rose 0.44% to 101.61, bolstered by market reaction to BoE decisions and the ECB. Meanwhile, global bond yields plunge, with the US 10-year bond rate down six basis points to 3,354%. That being said, Gold failed to gain any traction, and continues to fall further after touching $1,944 around 14:25 GMT, extending its losses towards the $1,920 area.

Applications for unemployment benefits in the United States fell

In terms of data, the US Department of Labor (DoL) revealed that initial jobless claims for the week ending January 28 fell to 183,000, down three thousand from 186,000 for the week. past and well below the 200,000 estimated by street analysts, which shows the resistance of the labor market. Today’s data added to Wednesday’s JOLTs report showing an improvement in job openings, while an ISM report on Wednesday said manufacturers are “not materially reducing” their workforce.

European central banks tighten monetary conditions

On Thursday, the Bank of England decided to raise rates 50 basis points to 4%, marking the 10th hike since the BoE did so in December 2021. BoE Governor Andrew Bailey said that since the meeting November, the BoE has seen the “first signs that inflation has turned the corner”, adding that “it is too early to declare victory yet, inflationary pressures are still there” Meanwhile, the European Central Bank joined the list of central banks raising rates to 0.50%, leaving the deposit rate at 2.50%, noting that a 50 basis point hike is possible in March.

Gold Technical Analysis

Technically, the XAU/USD pair had erased Wednesday’s gains, forming a bearish engulfing candlestick pattern which, if confirmed, could exacerbate bearish price action. The bullish scenario for the XAU/USD would remain above $1,900; otherwise, the yellow metal could extend your losses. A break of $1,900 would expose the January 18 low at $1,896.74, followed by the June 13 high turned support at $1,879.45, ahead of psychological support at $1,850.