CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

Gold price outlook for the week ahead: XAU/USD remains bearish biased

Gold prices left mostly flat last week despite slew of event risk; broader fundamental landscape likely remains bearish ahead and XAU/USD is showing increasing technical signs of reversing.

Source: Bloomberg

Gold fundamental forecast – slightly bearish

After five days of volatility, gold prices finished last week relatively flat as XAU/USD fell 0.25%. There was a lot to digest for the yellow metal including a US CPI report, the Federal Reserve, Fedspeak and even the European Central Bank. All of these could have a lasting impact on gold as we wrap up the last couple of weeks of 2022.

The latest US inflation report surprised lower, underscoring the peak Fed hawkishness narrative. But, the largest component of the CPI index continued higher, leaving concerns about sticky prices down the road. Meanwhile, the Fed slowed the pace of tightening, raising rates by 50-basis points last week, down from the aggressive 75-bps pace seen earlier this year.

But, the central bank continued to highlight that more work needs to be done. San Francisco Fed President Mary Daly said on Friday that the central bank is ‘far away’ from its price-stability goal. A closer look revealed that the market remains more dovish than what the Fed is projecting for interest rates ahead. While perhaps not a risk for gold in the immediate week ahead, it presents future volatility risk.

Lastly, the ECB surprised traders with a more hawkish stance than anticipated. Anti-fiat gold prices are the most vulnerable when central banks around the world are collectively tightening. That is why it has been such a dismal year for gold and will likely continue to be a threat for XAU/USD. Next week, all eyes turn to the Fed’s preferred inflation gauge, core PCE. A softer outcome may boost the yellow metal, but meaningful upside progress could be lacking until the tightening narrative changes.

Gold versus the US dollar

Source: TradingView

Gold technical forecast – slightly bearish

From a technical perspective, gold seems to be showing more and more signs of early reversal warnings. Last week, XAU/USD broke under a bearish Rising Wedge chart formation. Follow-through was lacking though. Negative RSI divergence has been present, showing that upside momentum has been fading. On top of this, a bearish Evening Star candlestick pattern formed.

Further downside confirmation may open the door to reversing gains since November. That would place the focus on the 50-day Simple Moving Average (SMA). The latter could reinstate the near-term upside focus. Otherwise, key resistance is the December 13th high at 1824. Breaking above that price exposes the June peak at 1879.

XAU/USD daily chart

Source: TradingView

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.