Gold (XAUUSD) Price Forecast: Is the Gold Market Coiling for a Breakout Rally?

Gold Consolidates as Traders Await Jobs and Inflation Data

Spot Gold is trading relatively flat on Tuesday. The market is posting an inside day, suggesting investor indecision and impending volatility. The key level to watch for direction today is a short-term 50% level at $5002.31.

At 12:53 GMT, XAUUSD is trading $5028.52, down $29.52 or -0.58%.

A sustained move over $5002.31 will indicate the presence of buyers, setting the stage for a potential breakout to the upside over the Fibonacci level at $5143.89. A breakdown under $5002.31 will mean that investors still feel the need to continue to build a stronger support base for the next rally.

The overall hesitation to overcome the retracement zone at $5002.31 to $5143.89 with conviction could be an indication that investors are looking for value rather than momentum.

Long-Term Bullish Foundation Still Intact

The long-term bullish fundamentals remain in place. A recent report showed that China was still a buyer of gold in January for a 15th straight month, and the geopolitical picture remains clouded with uncertainty. Maybe not enough to trigger a breakout rally, but enough to provide underlying support.

Traders are saying that improved risk appetite for global equities could be capping gains today. If that’s the case, then we may have to focus on the S&P 500 Index later today for an intraday catalyst. They are also looking at this week’s U.S. economic reports for direction, starting with today’s retail sales and finishing with Wednesday’s Non-Farm Payrolls report and Friday’s consumer inflation data.

NFP and CPI Will Determine the Next Move

It all comes down to what will influence Fed policy the most. What could move the Fed rate cut needle from June to March or maybe even June to September.

Gold traders expect the NFP report to show the economy added 70,000 jobs in January. Steady or better numbers could sink gold prices because it will keep the odds of a June rate cut on the table and could even push them into September. A big miss, and gold will launch another rally.

While the NFP could produce a volatile reaction on Wednesday, conditions could shift even more dramatically if consumer inflation rises above expectations on Friday. This could be bearish news for gold too.

The ideal recipe for a gold rally will be weak jobs data and steady-to-lower CPI. The size of the reaction in gold will be determined by whether the news shifts the next rate cut to March or leaves it at June.

Technical Picture: Building a Solid Base

Technically, the trend is up according to the daily swing chart and the 50-day moving average at $4580.20. The market has been consolidating inside a wide range, bordered by $4402.38 and $5091.93. Its pivot is $4747.15.

Holding inside the range is helping to create a solid support base, and this is good for the bulls because the height of the next rally is often determined by the length of the base. The rally from a spike bottom is often met with selling. A rally from a solid base tends to have some durability.

More Information in our Economic Calendar.