Gold Price Prediction: XAU/USD rises on Powell's dovish speech

The price of gold is increasing as a result of Jerome Powell's dovish speech on Wednesday, which weakened the US Dollar. At the time of writing, the Gold price is up approximately 0.6% and has risen from a low of $1,744.95 to a daily high of $1,765.

Earlier in the day, the price of gold reduced gains as US bond yields rose in anticipation of a highly anticipated speech by Federal Reserve Chair Jerome Powell. Powell stated, however, that policy will likely need to stay tight for some time and that it makes sense to slow the rate of interest rate hikes. The time to reduce the pace of rate hikes could arrive as early as the December meeting, according to him.

As a result, the gold price is on course for its best month since May 2021, thanks to the dollar's decline. Last observed, the US dollar index, DXY, was down 0.5% to 106.29, while the yield on the US 10-year note was down to 3.694%, not far from the November 28th low of 3.62%. The greenback is poised for its largest monthly loss since September 2010 as investors anticipate the Federal Reserve to reach its target interest rate in the first quarter of 2019. After four consecutive 75 bps rate hikes, the markets are now pricing in a 75% possibility of a lower 50 bps boost in December.

Moreover, evidence revealed that the labor market began to cool. In October, the number of job opportunities in the United States decreased to 10.3 million. The number of hiring and total separations remained relatively stable at 6 million and 5.7 million, respectively. "Job vacancies have decreased from their peak of just under 12 million in March, but with 1.7 job postings per unemployed person in the United States, the gap between labor demand and supply remains considerable," ANZ Bank analysts explained.

TD Securities analysts contend that a bull trap is being set in precious metals markets. "Over the past few days, systematic trend followers have substantially covered their gold shorts, while the strong price action has likely continued to draw additional long interest from discretionary money managers seeking a recession hedge amid peak central bank hawkishness."

"However," stated the analysts, "narrative is chasing prices, and we see many events on the docket that could spark a renewed leg lower as CTAs run out of dry powder on the bid. Alongside inflation and employment data, Chair Powell's speech is a prime possibility for a catalyst.