Gold Price Forecast: XAU/USD stumbles toward $1905, albeit failing US yields and soft USD

• Gold prices fall after printing a doji on Monday, aiming toward $1900.
• The New York Empire State Manufacturing Index plummeted, augmenting expectations for a Fed pivot.
• Gold Price Forecast: An evening star candle pattern suggests further downside is expected.

Gold price retreats from daily highs nearby $1,920 and drops beneath the $1,910 mark, aiming toward $1,900 amidst a risk-off impulse. Even though the US Dollar (USD) continues to trade with losses, and US Treasury bond yields are bear flattening, the non-yielding metal losses traction. At the time of writing, the XAU/USD is trading at $1,906.69.

Gold remains on the defensive, despite an offered US Dollar

Risk aversion is the name of the game, as US equities dropped. Corporate earnings in the US are one of the reasons for a dampened mood. US economic data revealed by the New York Federal Reserve (Fed) showed that manufacturing activity and business conditions worsened. Speculations that the Fed might pivot improved, with traders expecting a 25 bps rate hike in the February 1 decision.

On the latter, sources cited by Bloomberg commented, “The Fed will have reached its terminal Fed funds rate in 1Q, and investors can start reacting to incoming data without the lens of what better news will mean for Monetary Policy. Good news for the economy can become good news for markets.”

Aside from this, the US Dollar Index, which measures the buck’s value vs. a basket of six currencies, losses 0.12%, exchanging hands at 102.440. The US 10-year benchmark note rate is 3.533%, almost unchanged and paired with earlier losses.

US data released that Manufacturing activity in New York plunged to its lowest in January, with business activity contracting sharply, with the index falling 22 points to -32.9. The report showed that new orders and shipments declined substantially, while delivery times were unchanged and inventories edged higher.

What to watch?

The US economic docket will feature the New York Fed President John Williams, crossing newswires Tuesday. On Wednesday, the calendar will feature Retail Sales, prices paid by producers (PPI), and further Fed speaking.

Gold Price Forecast: Technical outlook

From a technical perspective, the XAU/USD daily chart depicts the formation of a three-candlestick chart pattern known as the evening star. Mondays’ price action formed a doji, followed by Tuesday’s $12.00 fall. Nevertheless, a daily close of around $1,905 or below is needed to confirm the pattern validity, suggesting the yellow metal might push for a break below $1,900.

If the above scenario plays out, XAU/USD first support would be $1,900. A breach of the latter will expose last Friday’s low of $1,892.40, followed by the January 11 high of $1,886.63 and $1,870.