Gold Price Forecast: Ominous Signs for XAU/USD

GOLD OUTLOOK & ANALYSIS

• Fed speakers and consumer sentiment in focus.
• Technical analysis suggests more downside to come – potential death cross, bear flag breakout.

XAU/USD FUNDAMENTAL BACKDROP

Gold prices have come under pressure with the USD finding support post-NFP. This Friday, the greenback has faltered slightly giving spot gold some relief ahead of the Michigan consumer sentiment release later today (see economic calendar below). Expectations are for a more optimistic outlook for February than January and any upside beat could see the dollar higher and gold under pressure once more. That being said, I do not foresee a large swing by way of the consumer sentiment print due to the substantial emphasis placed on next week Tuesday’s U.S. CPI report.

From Fed perspective, Fed officials have become increasingly more hawkish of recent and more aggressive talk later today could once more bolster the dollar.

ECONOMIC CALENDAR

Source: DailyFX Economic Calendar

TECHNICAL ANALYSIS

GOLD PRICE 4-HOUR CHART

Chart prepared by Warren Venketas, IG

The 4-hour XAU/USD price action is rather interesting from a technical analysis standpoint with the recent bear flag (green) breakout leading to bears almost piercing the 1850.00 psychological support handle. Traditionally, more downside would be expected from a bear flag breakout but with minimal fundamental data at hand, gold market participants are adopting a more cautious approach. As mentioned before, U.S. CPI is likely to either follow through with the downward move or reverse sentiment. Looking at the 50 (yellow) and 200-day (blue) moving averages, there seems to be a convergence that may result in a death cross that could form from sticky inflation next week.

Resistance levels:

• 1880.00
• Trendline resistance (black)

Support levels:

• 1860.00
• 1850.00

IG CLIENT SENTIMENT: HESITANT

IGCS shows retail traders are currently distinctly LONG on gold, with 63% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, due to recent changes in long and short positioning we arrive at a short-term mixed bias.

Contact and followWarrenon Twitter:@WVenketas