Gold Price Forecast: XAU/USD retreats towards $1,900 as markets doubt strong China growth

• Gold price extends the week-start pullback from multi-month high.
• China reports upbeat GDP, Industrial Production and Retail Sales but NBS comments challenge optimism.
• Return of full markets underpins US Treasury yields rebound and challenge XAU/USD bulls.

Gold price (XAU/USD) drops for the second consecutive day after poking the highest levels since April 2022, down 0.20% intraday as sellers keep the reins near $1,910 during early Tuesday.

US Dollar Index rebound from the seven-month low, amid firmer US Treasury bond yields, underpinned the Gold price pullback on Monday. However, the price-negative market sentiment even after China’s upbeat economics seemed to have weighed on the XAU/USD of late.

Talking about the data, China's Gross Domestic Product (GDP) for the fourth quarter (Q4) printed 0.0% QoQ figure versus -0.8% expected and 3.9% prior. Further details suggest that the Industrial Production for December grew 1.3% YoY versus 0.5% market forecasts and 2.2% prior readings. Additionally, Retail Sales improved to -1.8% YoY for December compared to -7.8% consensus and -5.9% prior.

It should be observed, however, that the China National Bureau of Statistics (NBS) mentioned after the data that the foundation for economic recovery is not solid yet.

Also read: China’s NBS: Foundation for economic recovery not solid yet

Other than the NBS comments, the market’s lack of acceptance of the upbeat China data, amid hopes of witnessing a downbeat outcome due to the COVID-19 woes, also seemed to have weighed on the sentiment and the XAU/USD prices. Furthermore, recently positive US sentiment figures and the inflation expectations conveyed on Friday, probed the previously dovish bias for the Federal Reserve (Fed) and hence underpin a rebound in the US Treasury bond yields.

That said, the S&P 500 Futures print mild losses as it retreats from the monthly high while the US 10-year Treasury yields defend the week-start recovery, up two basis points (bps) near 3.54% by the press time.

Moving on, Gold traders should wait for the second-tier US data like NY Empire State Manufacturing Index for January, expected -4.5 versus -11.2 prior, for clear directions. However, major attention will be given to Wednesday’s US Retail Sales for December, expected 0.1% YoY versus -0.6% prior.

Gold price technical analysis

A clear downside break of the three-day-old bullish channel favors Gold sellers as they approach the previous resistance line from January 09, close to $1,898 by the press time.

That said, the bearish MACD signals and downbeat RSI (14), not oversold, also keep the Gold bears hopeful.

It’s worth noting that the $1,900 threshold can act as immediate downside support while the 200-HMA level surrounding $1,878 could probe the XAU/USD bears afterward.

Alternatively, the stated channel’s lower line, close to $1,923 at the latest, restricts the immediate upside of the XAU/USD.

Following that, an ascending trend line from the last Thursday, near $1,947, could challenge the Gold buyers before directing them toward the April 2022 peak surrounding $1,998.

Gold price: Hourly chart

Trend: Further downside expected