Gold Price Forecast: XAU / USD bears move in for the kill ahead of a key event, Fed's Powell

Even though the US Dollar fell and yields increased advance of Jerome Powell's testimony before Congress, gold prices were slightly weaker during the US session. After breaking a streak of four consecutive weekly declines, the yellow metal was falling below $1,850. Initially, China's modest growth objective led to a strengthening of the US dollar, but Powell is expected to reiterate the view that rates will rise faster than predicted.

Recent statements by Fed officials have reaffirmed the need to continue raising interest rates until they reach at least 5%, and a plethora of data points in that general direction. "Several regional Fed presidents have signaled an openness to higher interest rates and larger increases if the data remain robust. It would mark a shift in the Fed’s guidance if Powell articulates similar sentiments at tomorrow’s testimony and a step back from the cautious policy around rates,'' analysts at ANZ Bank said.

Recent strength in Nonfarm Payrolls and Retail Sales data suggests that policy is not restrictive enough, and the Fed may have been caught off guard by weak fourth-quarter data. The analysts added that the Fed might benefit from highlighting the significance of short-term inflation expectations and current inflation in its estimates of restrictiveness.

In the meantime, the Nonfarm Payrolls data will be the focus, as many Fed members are anticipating a slowdown in job growth following January's surge of over 500,000 new positions. However, if the employment market doesn't cool sufficiently, the markets will likely see that the March FOMC meeting will likely see a 50bp hike, which is anticipated to impact heavily on the Gold price. ''A return to CTA selling could be in the cards as prices still tantalize with a break below the 200dma and key $1,800/oz mark,'' analysts at TD Securities argued.