Gold Price Forecast XAU/USD – Powell Said Just Enough to Stop Price Slide Ahead of Next Week’s CPI Data

Gold futures are cautiously moving higher on Wednesday as the U.S. Dollar retreated after less-hawkish- than-anticipated remarks from Federal Reserve Chairman Jerome Powell on Tuesday. The price action suggests Powell may have been dovish enough to put in a short-term bottom, but not dovish enough to trigger another breakout to the upside.

At this time, buyers may be content with recovering some of the recent losses while they await more economic data for guidance on future rate hikes. The report traders are likely waiting for is the U.S. Consumer Price Index on Tuesday, Feb. 14.

At 10:32 GMT, April Comex gold is trading $1893.30, up $8.50 or +0.45% and the XAU/USD is at $1880.64, up $7.63 or +0.41%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $173.94, up $0.12 or +0.07%.

Powell Said Nothing to Scare Gold Bulls

In Tuesday’s speech, Powell didn’t necessarily offer any new information but he did decline to meaningfully harden his tone on inflation, despite last week’s very strong employment numbers.

In our opinion, the gold market and the Fed are all in a position now where they are just zeroing in on the data, so for now traders are less likely to react to Fed officials and far more likely to respond to economic data like next Tuesday’s consumer inflation report.

Powell said U.S. interest rates might need to go higher, but he also mentioned disinflation, which led investors to believe he was more dovish than originally expected. This kind of mixed message will be clarified with the CPI report.

Powell’s Message May Have Been More-Dovish, but Kashkari Was Clearly Hawkish

The Federal Reserve will probably have to raise interest rates to at least 5.4% in order to tame high inflation with the latest jobs report for January showing actions so far have done little to dent the labor market, Minneapolis Fed President Neel Kashkari said on Tuesday.

“I think it surprised all of us,” Kashkari said in an interview with broadcaster CNBC, referring to a blowout January jobs report in which more than half a million employment gains were reported by the U.S. government.

“Nobody should overreact to one report…but the underlying strength of the services sector of the economy is still very robust. And that’s where I think a lot of us are focusing our attention…right now I’m still at around 5.4%. If I had to pick a number today, that would be where I was.”

Short-Term Reaction

If the Fed’s Kashkari had made his remarks weeks ago, the gold market would’ve been crushed, but he made them at a time when the market believes the Fed is nearing the end of its rate hiking campaign with rates likely to top at about 5.10%.

Furthermore, Powell is talking disinflation which seems to be the reason why gold traders aren’t selling in reaction to Kashkari’s comments.

This is further proof that the next major move in gold is likely to be determined by next Tuesday’s U.S. consumer price inflation report.