Gold Price Forecast: XAU/USD tops $2,000 after mixed US data, awaiting FOMC decision

• The price of gold broke above $20 on a risk aversion boost, which lowered the yield on US Treasuries.
• Sentiment deteriorated as US Treasury Secretary Yellen warned of bond shortfalls.
• Job offers in the US are down for the third month in a row, as the JOLTs report shows.

Gold price breaks the $2000 barrier on fears surrounding a banking crisis in the United States (US), while market players await the decision of the US Federal Reserve .(Fed) on raising rates. After hitting a daily low of $1,978.58, the XAU/USD trades at $2,008.52, gaining more than 1%.

XAU/USD Rallies on Risk Appetite After Yellen Warning of Possibility of Hitting Debt Ceiling

Risk aversion was one reason for Gold’s $25 gain. JP Morgan’s acquisition of First Republic Bank alleviated banking concerns. However, fiscal policy, mainly the increase in the US debt ceiling, is keeping investors on edge. US Treasury Secretary Janet Yellen commented in a letter to the US Congress that the office would not meet all US government obligations by June 1.

Apart from this, the US economic calendar revealed that job offers fell for the third consecutive month in March, although they remained at stable levels. The US Department of Labor (DoL) released the JOLTs report, which stood at 9.590 million, below the 9.775 million estimated by analysts.

In other data, March factory orders rose 0.9%, above estimates of 0.8% and better than February’s 1.1% contraction. Despite the ISM manufacturing PMI reporting in contractive territory on Monday, orders improved.

Additionally, XAU/USD found a bid, buoyed by lower US Treasury yields, across the board. The 2-year US Treasury yield fell 20 basis points to 3.935%, while the 10-year yield stood at 3.431%, plunging 14 basis points.

Meanwhile, the two-day meeting of the Federal Reserve’s Open Market Committee (FOMC) begins today. In swap markets, as CME’s FedWatch tool shows, traders expect an 81.8% probability of a 25 basis point rate hike in the FFR. However, the chances of a rate cut are increasing, with investors estimating that there will be three 25 basis point cuts between now and the end of the year.

Looking ahead to the week, XAU/USD traders await the FOMC decision, followed by Fed Chairman Jerome Powell’s press conference at around 18:30 GMT.

XAU/USD Technical Analysis

The XAU/USD pair continued to trade sideways, but the break above the 20-day EMA at $1,990.12 exacerbated a test of the $2,000 figure. The Relative Strength Index (RSI) oscillator tested the 50 midline but extended its distance as it is heading higher, while the Rate of Change (RoC) confirms that buyers are gathering momentum ahead of the FOMC decision. On the upside, key resistance levels lie at the April 5 high of $2,032.13, followed by the year-on-year high of $2,048.79. On the other hand, $2,000 will be the first line of defense for gold buyers, followed by the 20 day EMA around $1,990.