Gold Price Forecast: XAU/USD Attempts Hints at Breakdown Ahead of

Gold Weekly Forecast: Mixed

Stronger dollar sends gold lower ahead of US Q1 GDP and major US tech earnings
With a lack of clear bearish drivers for gold, prices may favor a period of consolidation before the next major catalyst – potentially US GDP
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See what the precious metal has in store for Q2

US Fundamental Data Holds Up Ahead of US GDP, Stronger Dollar Sends Gold Lower

Gold has been consolidating around the lower portion of the ascending channel for the last five trading sessions, finally hinting at a breakdown as the dollar receives a bid on better-than-expected fundamental data (PMI). The chart below also highlights the massive drop off in volatility (orange line) after the massive peak which brings into question whether the recent attempt to break lower can be sustained. It is with this view that this week’s forecast comes with the mixed bias.

Gold Daily Chart vs a Measure of Gold Volatility (GVZ)

Source: TradingView, prepared by Richard Snow

Looking ahead to next week, US first quarter GDP data is likely to provide direction for the dollar and for gold as an extension, but the bar for a higher dollar remains a very high one. The Fed have been signaling its intension to hike just above 5% since the end of last year and have not veered from that projection even in light of the March banking instability.

However, with the May FOMC meeting more than a week away, a positive US GDP print for Q1 could see a further upward shift in rate hike expectations, a firmer dollar and weaker gold prices. Admittedly, this is in contrast with my longer-term view for gold as markets are likely to shift their focus on the prospect of rate cuts in the second half of the year in the days and weeks after the May FOMC meeting – which bodes well for non-interest bearing metal.

Gold Technical Levels of Interest: Consolidation in the Lead up to US GDP?

The daily chart, with levels attached, shows the impulsive Friday decline at the end of the London session. Just two days prior, a similar move also breached the ascending channel but ultimately retraced almost back within the channel once more. Therefore, the daily close will help inform where we start of next week as a full recovery of the intra-day move keeps the bullish trend well in place.

However, given the strong bull trend, this latest move lower could simply provide better levels for a bullish continuation set up with support at $1970 and $1960 just beneath that. In the week to come, in the absence of clear bearish catalysts for gold, gold prices may favor a consolidation as the potential for conflicting data next week makes its way across the newswires.