Gold Price Forecast: XAU/USD bears attack $1,890 support as yields underpin US Dollar run-up

• Gold price takes offers to refresh intraday low during three-day downtrend.
• US Dollar contrasts yields as BoJ inaction pleases bond buyers.
• Mixed US data, Fedspeak previously probed DXY bulls.
• US Retail Sales, PPI will be important for fresh impulse.

Gold price (XAU/USD) stands on slippery grounds while refreshing the weekly bottom around $1,897 during early Wednesday morning in Europe. The yellow metal’s latest weakness could be linked to the US Dollar’s upside, as well as mixed concerns surrounding one of the world’s biggest XAU/USD users, namely China.

Bank of Japan (BoJ) disappointed the hawks while defending the ultra-loose monetary policy and drowned the yields earlier in the day.

As a result, market players rushed toward US Dollar Index (DXY) which braces for the biggest daily gains in two weeks, up for the third consecutive day around 102.90 by the press time. That said, the Bank of Japan’s (BoJ) disappointment weighed the US Treasury bond yields as they reverse the early-day rebound to drop towards 3.48% while the S&P 500 futures printed 0.30% intraday gains, following the mildly negative marks of the intraday performance. On the same line, Japanese Government Bonds (JGB) slumped to 0.362% after the BoJ announcements from 0.50% just before the BOJ.

Elsewhere, expectations of upbeat growth figures from China, as conveyed by economists from Goldman Sachs, join the fears of more Sino-American tussles over Taiwan to probe China-linked optimism and favor the Gold sellers. Earlier in the day, South China Morning Post (SCMP) mentioned that Beijing ‘should be wary’ as the US and Taiwan seeks closer economic ties.

It should be noted that the downbeat prints of the New York manufacturing data, namely the Empire State Manufacturing Index for December, joined downbeat comments from Federal Reserve Bank of Richmond’s President and CEO Thomas Barkin to weigh on the Gold price previously.

Looking forward, a speech from BoJ Governor Haruhiko Kuroda will be important for the immediate direction of the XAU/USD, due to its latest reaction to yields. However, major attention will be given to the US Retail Sales and PPI for December, expected 0.1% and -0.1% MoM versus -0.6% and 0.3% respective priors, amid the BoJ’s latest disappointment.

Also read: US Retail Sales and PPI Preview: Low expectations may trigger upside surprise, US Dollar boost

Gold price technical analysis

Gold price jostles with a 10-month-old horizontal resistance-turned-support as the RSI (14) retreats from overbought territory. Adding strength to the downside bias is the receding strength of the bullish signals from the MACD indicator. As a result, the bullish price is likely to decline further.

However, the XAU/USD needs to provide a daily closing below the aforementioned horizontal support, previous resistance around $1,895-90, to convince the sellers.

Even so, an ascending trend line from mid-November, close to $1,867 by the press time, could challenge the Gold bears before giving them control.

Alternatively, the recent high surrounding $1,930 precedes the late March swing top near $1,966 to restrict short-term Gold upside.

In a case where the metal price rises past $1,966, the August 2022 peak of $1998 will be in focus.

Overall, the Gold price may witness further downside but the bears are far from retaking control.

Gold price: Daily chart

Trend: Further weakness expected