Gold Price Forecast: XAU/USD lower lows open doors for a slide sub-$2,000

XAU/USD Current price: 2,029.70

• A better market mood undermined demand for the US Dollar in the American session.
• Investors await a United States inflation update and lift bets on a March rate cut.
• XAU/USD sees a limited bullish potential, has room to pierce the $2,000 mark.

The US Dollar came under selling pressure during American trading hours, helping XAU/USD trim a good part of its early losses. The bright metal trades around $2,030 a troy ounce after falling to $2,016.61, its lowest since mid-December. Financial markets recovered their optimism with Wall Street’s opening, as investors resumed betting the Federal Reserve (Fed) would cut rates as soon as March. Furthermore, a report from Bank of America indicates its analysts believe the central bank may begin tapering the massive Treasury holdings by the same time.

Government bond yields retreated, with the 10-year Treasury note currently yielding 3.97%, down 6 basis points (bps). The 2-year note offers 4.31%, down 7 bps. Stocks, in the meantime, trade mixed. Most United States (US) indexes stand in the green, but the Dow Jones Industrial Average is down 35 bps or 0.09%.

Market participants await a US inflation update. The country will release the December Consumer Price Index (CPI) next Thursday,  foreseen at 3.2% YoY, above the previous 3.1%. The core annual reading, on the contrary, is expected to ease to 3.8% from 4% in November.

XAU/USD short-term technical outlook

The daily chart for XAU/USD shows that the risk skews to the downside. The bright metal trades below a flat 20 Simple Moving Average (SMA) while the 100 and 200 SMAs converge around $1,962 with modest upward strength. The Momentum indicator turned flat and consolidates around its 100 level, while the Relative Strength Index (RSI) indicator offers a bearish slope at 49, anticipating another leg lower without confirming it.

The 4-hour chart shows technical indicators bounced from their recent lows but remain within negative levels, limiting the odds for a firmer recovery. At the same time, XAU/USD battles with a directionless 200 SMA while the 20 SMA heads south above the current level, providing dynamic resistance around the $2,040 level.

Support levels: 2,016.60 1,998.65 1,987.20

Resistance levels: 2,040.20 2,052.30 2,065.45