Federal Reserve’s dovish hike can recall XAU/USD buyers

The aforementioned United States (US) data contrasts with the Federal Reserve (Fed) policymakers’ hesitance to welcome doves, which in turn will be interesting to watch for Gold traders. The reason could be linked to the nearness of the US central bank’s pivot rate of around 4.50% and the market’s talks of no rate hikes after a 0.25% increase in benchmark rates in February. That said, CME’s FedWatch tool suggests considerable favor for the 0.25% rate hike in this week’s monetary policy meeting of the Fed but nearly no supporters of one such move in March. Hence, a dovish hike is on the table and can tease the Gold buyers unless Fed Chairman Jerome Powell sounds hawkish.

Considering this, analysts at Australia and New Zealand Banking Group (ANZ) said, “After starting early and front-loading hikes last year, the Fed is expected to further reduce the amplitude of its hiking and raise the fed funds rate by 25b to 4.50–4.75%. We still think it is close to reaching levels where it will pause. However, the buoyancy in the labor market and slow pace with which services inflation is expected to fall remain problematic, underpinning our view that rates will stay at peak levels in 2023. “

United States employment data to direct post-Fed Gold moves

Apart from the Federal Reserve (Fed) concerns, the United States (US) monthly job report for January will also be important for Gold traders. As per the market forecasts, the headline Nonfarm Payrolls (NFP) is expected to ease to 175K from 223K prior while the Unemployment Rate might also inch up from 3.5% to 3.6%. It’s worth observing that an anticipated uptick in the Average Hourly Earnings, to 4.9% YoY versus 4.6% prior, might contradict the downbeat forecasts for top-tier job numbers and may defend Gold sellers.

Many more catalysts to entertain XAU/USD traders

Other than the Federal Reserve’s (Fed) showdown and the United States jobs report for January, the monetary policy verdict of the European Central Bank (ECB) will also be important for Gold traders as it affects the US Dollar via Euro (EUR) moves. Additionally, the Institute for Supply Management’s (ISM) Purchasing Managers’ Indexes (PMI) will provide extra directions to the XAU/USD traders.

It should be noted that the hawkish ECB outcome is on the table and could challenge the Gold sellers, by exerting downside pressure on the US Dollar. On the same line, the ISM Services PMI grabbed XAU/USD buyer’s attention after marking the first below-50 figure, suggesting a contraction in activities since June 2020, for December 2022 during early January. Hence, any further deterioration in the key US activity numbers could offer a bumpy road to the Gold sellers even if the Fed and US employment data favor XAU/USD weakness.

Also read: Gold Price Weekly Forecast: Bulls to remain in control as long as $1,900 stays intact