Spot Gold price is retreating from the highest level seen in nine months at $1,937.43 in the Europen session, as the renewed uptick in the US Treasury bond yields is aiding the recovery in the US Dollar. Meanwhile, the US Dollar also seems to benefit from cautious optimism, amid dovish Federal Reserve expectations, mixed US corporate earnings reports and weak domestic economic data.Gold Forecast: Gold $1,823 Support Breakpoint Zone
Investors are also resorting to repositioning heading into the Fed’s ‘blackout period’ and China’s Lunar New Year holidays, starting next week. Meanwhile, the focus will remain on the speeches by the Fed policymakers Patrick Harker and Christopher Waller for the next directional move in the Gold price, as those will be the last words from the US central bank ahead of its February 2 policy announcement.
To the upside, Gold buyers gather strength for a test of the $1,966 psychological level, above which the confluence of April 20 and April 22 highs around $1,975 will come into play.
The 14-day Relative Strength Index (RSI) is peeping into the overbought territory, at around 71.00, suggesting that there is more room to the upside.
On the flip side, Gold sellers will once again challenge the horizontal support line just beneath $1,892.
Further south, the correction could resume toward the $1,850 region, the meeting point of the January 11 high and the ascending 21-Daily Moving Average (DMA) merge.
Gold Short Term Correction
Gold started the year with a bang. Economists at hold a constructive view for Gold over the next 12 months, but a short-term correction looks likely if a hawkish Fed surprises the market.
“We expect Gold to remain in favour as inflation retreats and interest rates near their peak. We see the following drivers supporting the precious metal: A potential pause in the Fed’s interest rate cycle in Q2, rising recession risks, potential downside in the USD, geopolitical risks remaining high and strong physical demand.”
“The recent rally nevertheless looks vulnerable to a price correction as it was largely driven by expectations that the Fed will turn dovish. Any disappointment on the monetary policy front could see prices correcting in the short term.”