Gold Price Forecast: XAUUSD sees a reversal to near $1,890 ahead of US PMI, Fed’s policy in focus

• Gold Price is expecting a fresh bullish impulsive wave as the RSI (14) has shifted into a bullish range.
• Fed’s policy this week will keep investors on the tenterhooks.
• Soaring inflation is hinting at a jumbo rate hike by the Fed.

Gold (XAUUSD) Price witnessed a decent corrective move to mildly below $1,900 after hitting a high of $1,920.02 on Friday. The precious metal went into a correction mode after a firmer rebound from a low of $1,872.22 on Thursday. The bright metal found a decent pullback from a high of $1,920.02 as expectations of an interest rate hike by the Federal Reserve (Fed) got bolstered by higher-than-expected Personal Consumption Expenditure (PCE) by the US Bureau of Labor Statistics. The yearly PCE landed at 6.6%, higher than the market consensus of 6.5% and the prior print of 6.3%. While, the monthly figure printed at 0.6%, much higher than the forecasts and the previous outcome of 0.5%.

Soaring inflation is hinting at a jumbo rate hike by the Fed on Wednesday. Also, the market estimates are aiming at a 50 basis point (bps) interest rate hike by the Fed this week. Fed chair Jerome Powell is going to feature a mega-rate hike and along with that investors will focus on the dictation over the balance sheet reduction. Demand for a sheer liquidity squeeze from the economy is strongly required to leash the roaring inflation. Therefore, investors should brace for a tight liquidity environment this year, which is continue to keep the precious metal on the tenterhooks. Apart from the rate hike announcement and balance sheet reduction, the third catalyst, which will remain in the spotlight, is further guidance. Investors are very much curious to get insights into the neural rate reversion roadmap as it will display the extent of aggressiveness by Fed policymakers.

Also read: Gold Weekly Forecast: XAU/USD's gains to remain limited on demand-side dynamics

Meanwhile, the US dollar index (DXY) is firmly holding above 103.00 as an aggressive hawkish tone by Fed chair Jerome Powell and his colleagues look imminent. The DXY faced some correction on Friday after printing a fresh 19-year high at 103.93 on Thursday as profit-booking dragged the asset lower. Usually, an asset faces some exhaustion in an uptrend gradually as it comes closer to the event. The 10-year US Treasury yields are approaching 3% vigorously on expectations of a higher interest rates environment going forward.

On Monday, investors will focus on the release of the ISM Manufacturing PMI, which is expected to land at 58 against the prior print of 57.1. A higher-than-expected reading will hurt the gold prices.

Gold technical analysis

On an hourly scale, XAUUSD is trading near the 50% Fibonacci retracement (placed from last week low at $1,872.24 to Friday’s high at $1,920.02) at $1,896.35, at the press time. The asset is likely to find a bullish impulsive wave after completing its correction to near 61.8% Fibo retracement at $1,890.70.

The Relative Strength Index (RSI) (14) has displayed a bullish range shift. The momentum oscillator remained in a bearish range of 20.00-40.00 and a directionless radius of 40.00-60.00 for a long period but has managed to shift into a bullish range of 60.00-80.00 and will focus on supporting itself from gyrating into a bearish range.

Gold hourly chart