Gold Price Forecast: XAU/USD firms at around $1870 as the USD turns almost flat

• Gold remained steadily firm, around $1870 ahead of Powell’s speech.
• US Federal Reserve officials expect rates to peak above 5%, with some estimating 5.4%.
• Gold Price Forecast: To remain neutral biased but slightly skewed to the downside.

Gold price clings to gains on Tuesday, though it remains below Monday’s high of 1881.31, ahead of Fed’s Chair Jerome Powell’s comments in an event at the Economic Club of Washington at 17:40 GMT. Hence, the XAU/USD is exchanging hands at 1874.20 after hitting a daily low of 1865.81 at the time of writing.

XAU/USD seesaws as investors expect a hawkish speech by Powell

Wall Street has turned positive, except for the Dow Jones Industrial. A late risk-on impulse at around the London Fix weighed on the US Dollar (USD), with Briton traders squaring their positions ahead of Powell’s speech. It’s the first time the Fed Chair takes the stand after an eye-opening US jobs report, with the economy adding more than 500,000 jobs and the unemployment rate diving to 53-year lows at 3.4%.

Comments from Federal Reserve officials spurred a reaction from market participants. Raphael Bostic, from the Atlanta Fed, commented that the Fed would need to raise rates further than previously foreseen. Echoing some of its comments was the Minnesota Fed President Neil Kashkari, a voter in 2023, that he anticipates the Federal Fund rate at around 5.4% due to the stronger-than-expected labor market report, which showed that the US central bank needs to keep raising rates.

The reflection of those comments is US bond yields. The 10-year benchmark note rate is 3.652%, up by two bps. After the US Nonfarm Payrolls report, the 10-year bond yield rallied 26 bps, as traders expect the Federal Funds rate to peak at around 5.25%. In addition, the US 10-year TIPS bond yield, a proxy for real yields, is advancing one bps, sitting at 1.369%, capping Gold’s rally on Tuesday.

What to Watch?

The US economic docket will feature further Fed speaking, Initial Jobless Claims for the week ending on February 4, and the University of Michigan Consumer Sentiment.

Gold Price Analysis: Technical outlook

XAU/USD remains neutral biased, trapped within the boundaries of the 20 and 50-day Exponential Moving Average (EMA) at the $1897-$1855 range. To resume its upward bias, Gold needs to break Monday’s high of $1882, which would exacerbate a test of the 20-day EMA, ahead of the $1900 mark. Otherwise, the XAU/USD will be under selling pressure, with the February 6 low at $1860.44, as the first demand area, followed by the 50-day EMA, ahead of December’s 27 daily high-turned-support at $1833.29