- The price of gold climbs inside a bullish chart pattern as 2023 begins for traders.
- US Dollar weakness supports XAU/USD strength even as holiday mood limits bullish momentum.
- Gold buyers will be looking for clues on the Federal Reserve pivot, may also encourage a softer nonfarm payroll in the US.
The price of gold (XAU/USD) begins 2023 without major surprises as it hovers around $1,825 in the early hours of Monday’s Asian session. While the New Year holidays in several markets appeared to have limited the metal’s immediate moves, the vastly weaker US Dollar kept hope among bright metal buyers ahead of this week’s high-profile data and events in the US. United. Even so, fears emanating from China and worries surrounding global moves in 2023 are probing XAU/USD bulls.
Gold Applauds Mixed US Data Weighing on US Dollar
In 2022, the US Dollar Index (DXY) recorded the biggest annual gain since 2015. Even so, the gauge of the greenback against the six major currencies signaled that the past three months have been in deficit. The reason may have to do with recently weaker data from the United States (US) which fueled expectations of a Federal Reserve (Fed) pause in rate hikes. It should be noted, however, that the strength of the price of gold, due to the weakness of the DXY, seems to have recently been called into question by the fears of Covid emanating from China, as well as by the pessimistic comments of the director Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva.
On Friday, the Chicago Purchasing Managers’ Index broke through the market consensus of 41.2 and the previous 37.2 reading to print December’s figures of 44.9. Despite this, the activity gauge signaled a contraction for the fourth consecutive month.
Market fears probe XAU/USD bulls
Despite the overall weaker DXY over the past three months, recent fears emanating from worsening coronavirus conditions in China appear to challenge gold buyers, primarily due to Beijing’s status as one of the largest users. of raw materials in the world.
On Saturday, Chinese President Xi Jinping appeared in a televised address to mark the New Year and called for more effort and unity as the country enters a “new phase” in its approach to fighting the pandemic. .
Following this, IMF Managing Director Kristalina Georgieva said the new year is going to be tougher than the year we are leaving behind. The IMF chief also added: “Why? Because the big three economies – the US, EU and China – are all slowing down simultaneously.
Given the global economic fears, XAU/USD bulls may experience further difficulties in thinned markets over the holidays.
Gold traders await Federal Reserve minutes and US nonfarm payrolls
Along with the challenges facing Chinese gold traders and global economic concerns, the cautious mood ahead of the minutes of the latest Federal Open Market Committee (FOMC) meeting and monthly US employment data could also challenge the rise of XAU/USD. .
The scheduled events and data become more prominent as there has been a week-long gap since the US signaled major catalysts and the US Dollar declined mostly during the said time frame. Moreover, the receding hawkish bias on the Federal Reserve’s (Fed) next move also inflates the importance of the predicted factors.
That said, the FOMC minutes will be closely watched for any hints on the Fed’s pivot as the US central bank has signaled lower rates for longer, which could help the price of gold hold firmer.
On the other hand, weak US employment numbers could help the US dollar remain calm and propel the price of gold.
Gold Price Technical Analysis
The price of gold represents a month-old bullish channel formation on the four-hour chart. Bullion’s bullish momentum also justifies bullish signals on the Moving Average Convergence and Divergence (MACD) indicator, as well as the upbeat Relative Strength Index (RSI) line, located at 14.
It should be noted, however, that the RSI is approaching overbought territory and suggests the XAU/USD pullback, which in turn highlights a three-week horizontal hurdle around $1,825 as the key to watch for buyers. Golden.
Following this, the aforementioned upper trending channel upper line near $1,835 at press time may challenge the metal’s further upside.
In an event that gold bulls ignore the likely overbought RSI and break through resistance at $1,835, the June 2022 peak of around $1,880 will be in focus.
Alternatively, an upward sloping support line from Wednesday limits the immediate drop in gold price near $1,820, a break of which could take the metal towards the 100 exponential moving average (EMA) level. close to the $1,800 threshold.
Even so, gold remains on the bull’s radar unless it stays above the indicated bullish channel support line near $1,785 at the latest.
Therefore, the price of gold is technically strong even though a pullback is brewing lately.
Gold price: four-hour chart