Gold Price Forecast: XAU/USD falls around $1,940

• The price of gold falls despite the weakness of the dollar and the fall in the yield of Treasury bonds.
• According to analysts, the fall in XAU/USD could be due to a technical move or profit taking.
• Risk aversion is the main driver of the price action on Wednesday.
• Gold Technical Analysis: Continues to rise, although heading for a correction before resuming the uptrend.

The Prayed Breaks two days of gains and pulls back from weekly highs hit around $1,942.51, stumbles below $1,940 amid risk-off momentum that weighed on safe-haven assets, including the safe-haven USD. US Treasury yields are also falling on a move in gold that appears to be driven by profit taking. At the time of writing these lines, the XAU/USD was trading at $1,933.00.

Sentiment remains negative, weighed down by earnings and downgrading of US companies’ forecasts

Wall Street extended its losses at the open, after warning that Microsoft’s sales of cloud services could slow. Other big tech companies are feeling the pain of rising interest rates in the United States (US), as the US Federal Reserve (Fed) tightened 400 basis points, its monetary policy, since March 2022, to curb high inflationary pressures. However, next week’s monetary policy decision, with financial markets widely expecting a 25 basis point FFR rate hike, could continue to weigh on the dollar.

The dollar index (DXY), which measures the value of the dollar against a basket of currencies, lost 0.10% to 101.828, weighed down by the gloomy US economic outlook. The yield on 10-year US Treasury bonds falls one and a half points and operates at 3.44%.

The World Bank and the Swiss Federal Office for Customs and Border Security reported that Swiss gold exports to China increased in 2022, up to 478 metric tons. This figure is higher than the 274 tons of 2021.

Meanwhile, the US economic calendar for Thursday would be busy, led by the Gross Domestic Product (GDP) Advance for the fourth quarter, which is expected at 2.6%. In addition, Durable Goods Orders are expected to recover to 2.5%, compared to the -2.1% drop last month. Last week’s jobless claims will also be released, as will core inflation as measured by the US Federal Reserve’s PCE index.

Gold Technical Analysis

From a technical point of view, the XAU/USD pair is consolidating around the $1,910-$1,940 range for the last three trading sessions, unable to break $1,950. It should be noted that the Relative Strength Index (RSI) remains in overbought territory, while the Rate of Exchange (RoC) has retreated from its high for the week, suggesting that buying pressure is easing. Therefore, the gold price could pull back in the short term before resuming its uptrend.

XAU/USD key support levels are $1,900, followed by the January 18 daily low of $1,896.74. A break below will expose the 20-day EMA at $1,889.22. On the other hand, for a continuation of the uptrend, XAU/USD needs to recover to $1,950 as its target is a recovery towards $2,000.