Gold Price Forecast: XAU/USD could see a dead cat bounce toward $1,942 on profit-taking

• Gold price flirts with three-month lows near $1,910, set for a weekly decline.
• Hawkish global central banks’ outlooks fuel recession risks, boosting US Dollar and US Treasury bond yields.
• Gold price breached the key $1,918 support, eyes a pullback before resuming the downtrend.

Gold price extends its losses into the sixth consecutive trading day on Friday, languishing at three-month lows near $1,910. The United States Dollar (USD) is building on its previous staggering recovery alongside the US Treasury bond yields, awaiting the US S&P Global Preliminary PMI data and Fedspeak for fresh directives.

Global Preliminary PMIs in focus

Thursday saw a renewed sell-off in the Gold price as the US Dollar staged an impressive comeback on hawkish commentary from the US Federal Reserve (Fed) policymakers and broader risk aversion.

In his second day of Congressional testimony on Thursday, Fed Chair Jerome Powell said that policymakers feel "it will be appropriate to raise rates again this year, and perhaps twice," if the economy performs about as expected, despite rates being at an appropriately restrictive level. Meanwhile, Federal Reserve (Fed) Governor Michelle Bowman noted that "additional policy rate increases" will be to reach a sufficiently restrictive level and control inflation.

Further, the Bank of England (BoE) surprised markets with a 50 basis points (bps) rate hike, although with no changes to its policy guidance. But expectations of more monetary policy tightening by major global central banks stoked recessionary fears, which fueled a fresh bout of risk aversion and lifted the safe-haven US Dollar across its main competitors and the USD-denominated Gold price.

Strengthening bets that higher rates will remain longer also helped the US Treasury bond yields recover ground, despite the risk-off mood, underpinning the US Dollar recovery while weighing further on the non-yielding Gold price.

With central banks’ expectations back in play, markets somewhat ignored mixed United States weekly Jobless Claims and Existing Home Sales data. Markets are now pricing in a 77% chance that the Fed will raise rates by 25 bps at its policy meeting next month.

Attention now turns toward the preliminary business PMI reports from across the Euro area economies and the United States for a fresh take on the health of the global economy. Should the Eurozone and US data disappoint and suggest an inevitable downturn in the worldwide economy, risk-off flows will likely flare up and bolster the US Dollar rebound while fueling the ‘sell everything’ mode across the financial markets. However, the end-of-the-week flows, and potential profit-taking in the Gold price could rescue buyers.

Gold price technical analysis: Daily chart

As observed on the daily chart, Gold price is hanging on a thin rope just above the March 16 low of $1,908, having finally cracked the March 17 low of $1,918 on a daily closing basis on Wednesday.

Should the former safeguard the downside, the Gold price could attempt a dead cat bounce toward the critical 100-Daily Moving Average (DMA) at $1,942. The March 17 low at $1,918 and the $1,930 round figure could, however, challenge Gold bulls on the road to recovery.

Meanwhile, the 14-day Relative Strength Index (RSI) is turning higher, although below the midline, supporting the view for a potential pullback in the Gold price.

Alternatively, if Gold sellers remain defiant, a fresh drop toward the $1,900 level cannot be ruled out on a breach of the March 16 low of $1,908. The next relevant cushion for Gold bulls is the March 15 low of $1,886.