Gold price consolidates near a multi-month high on Tuesday as investors take a breather ahead of Fed Powell's speech. A better market mood and dovish Fed bets have favored the recent gold rally.
At the time of writing, the spot price XAU/USD is trading at the $1,875 area, a modest 0.2% above its opening price, after touching its highest level in eight months at $1,881 on Monday.
At the same time, the U.S. dollar, measured by the DXY index, hit a seven-month low of 102.94 and currently trades around 103.30, virtually unchanged on the day.
The greenback has remained under pressure amid lower bond yields, which could be seen as the opportunity cost of holding gold. The United States 10-Year Treasury note currently yields 3.57%, from near 3.9% seen last week.
While FOMC members have remained hawkish and continue to underline the Fed's commitment to bring down inflation, markets have fully priced in a 25 bp hike in February, with nearly 30% odds of a 50 bp increase.
Investors turn to Federal Reserve Chair Jerome Powell's speech at the Riksbank's International Symposium on Central Bank Independence. While markets will scrutinize Powell's words for clues on the next move, he will probably reiterate its hawkish rhetoric.
The U.S. Consumer Price Index figures will be published on Thursday. Consumer inflation is expected to slow to 6.5% over the year to December from 7.1% the previous month.
From a technical perspective, XAU/USD holds a positive short-term bias according to indicators on the daily chart, while the price hovers near an eight-month high. Still, the RSI remains near overbought territory, which could give way to a phase of consolidation, or a modest correction, before another leg higher.
On the upside, the immediate resistance level is seen at $1,880, followed by the 61.8% retracement of the $2,070 - $1,615 decline at $1,896. On the other hand, the following support levels are seen at weekly lows around $1,865 and the $1,820-25 area, where the 20-day SMA converges with month-to-date lows.