Despite a minor increase in the US dollar, the price of gold retreated from a seven-month high. The likelihood of Fed rate rises of a lower magnitude supports the metal to some extent. A milder risk tone constraints the downside for the safe-haven XAU/USD.

On Thursday, the gold price experienced some selling pressure and ended a four-day gaining run, reaching its highest level since June 2022, around the $1,865 level reached the day before. The XAU/USD is now trading in the $1,846–1,845 range, down around 0.50% for the day, and is still on the back foot going into the North American session.

A little increase in the US dollar damages the price of gold.

Following a hawkish tone from the Federal Open Market Committee (FOMC) December meeting minutes that were made public on Wednesday, the US dollar is edging higher. This is thus seen as a critical element weakening the price of gold expressed in US Dollars. In truth, the US Federal Reserve was planning to maintain higher interest rates for a more extended period and was still committed to reducing inflation.

The US Nonfarm Payrolls (NFP) are still the primary focus.

In anticipation of the much anticipated US monthly employment statistics on Friday, market investors also seem likely to reduce their negative wagers surrounding the US Dollar. The widely publicized NFP data may impact the Federal Reserve’s path toward raising rates and driving up USD demand. This will help investors predict the next leg of the non-yielding yellow metal’s directional advance.

Choose less aggressive wagers. Federal Reserve supports the price of gold.

The US Treasury bond rates are now hovering around a multi-week low due to the likelihood of lesser rate increases by the Federal Reserve, which may provide some support to the non-yielding Gold price. It’s important to remember that Fed policymakers agreed that the institution should pause its rapid interest rate rises. Thus, pessimistic traders should use some care.

A softer risk tone helps to minimize losses for the price of gold.

In addition, a lower risk tone may help limit the fall in the price of safe-haven gold. Even if China’s strict COVID-19 regulations have been loosened, investor mood is still being affected by worries of a worsening global economic collapse. This is clear from a recent move down in US market futures and may support the safe-haven currency pair XAU/USD.

The fundamental environment is bullish.

The aforementioned fundamental background leads to the conclusion that the price of gold will move upward against the least resistance, which supports the possibility of some dip-buying at lower levels. Therefore, it will be wise to hold off on preparing for any significant corrective collapse until there is actual follow-through selling before determining that the XAU/USD has peaked in the short term.

The US macro data from Thursday may give everything a boost.

Traders are now focusing on the US economic calendar, which includes publishing the Weekly Initial Jobless Claims report and the ADP data on private-sector jobs. This will affect the USD price dynamics and give the price of gold some momentum, along with the US bond rates. In addition, the general risk mood may help provide chances for short-term trading.

Technical forecast for gold prices.

Any ensuing decline is anticipated to find support close to the last multi-month high, around the $1,833 region, from a technical standpoint. The $1,824–$1,822 horizontal resistance breakpoint follows, which should now serve as a short-term basis for the price of gold. If the support above levels is not held, technical selling may occur, pushing the XAU/USD down toward the $1,800 level.

On the other hand, the overnight swing high in the $1,865 area may serve as a temporary roadblock for the price of gold before it reaches the $1,870 area. Bullish traders may see some follow-through purchasing as a new trigger, opening the door to a move toward recovering the $1,900 round number for the first time since May 2022.