Gold Price Forecast: XAU/USD directs four-day downtrend towards $1,800, Fed’s Powell eyed
|- Gold Price extends pullback from 200-DMA, refreshes weekly low by the press time.
- Risk-aversion, hawkish Fed concerns renew US dollar demand.
- Fed’s Powell needs to win over the recession fears to convince greenback bulls.
Gold Price (XAU/USD) takes offers to refresh weekly low around $1,825 as risk-aversion weighs on the yellow metal ahead of Fed Chair Jerome Powell’s testimony on the bi-annual Monetary Policy Report. In doing so, the bullion declines for the fourth consecutive day while extending Friday’s downside break of the 200-DMA.
The market’s risk-aversion takes clues from the fears of an economic slowdown amid hawkish central bank actions.
On Tuesday, Richmond Federal Reserve President Thomas Barkin said that there will be no rapid return for the U.S. economy to the experience of the previous decade of stable growth, jobs and inflation, Reuters reported. On the same line, European Central Bank (ECB) Governing Council member Olli Rehn also mentioned that “It is very likely that September rate hike is bigger than 25 bps,” said ECB’s Rehn per Reuters.
Elsewhere, Economists polled by Reuters expect the Fed will deliver a 75-basis-point interest rate hike next month, followed by a half-percentage-point rise in September, and won't scale back to quarter-percentage-point moves until November at the earliest.
It’s worth noting that US President Joe Biden and Treasury Secretary Janet Yellen tried to convince markets that the recession fears aren’t inevitable but the market refrain from buying the assurance.
While portraying the risk-aversion, the S&P 500 Futures drop 1.10% intraday to reverse the two-day rebound from the lowest levels since late 2020. It’s worth noting that the US Treasury yields also fail to cheer the risk-aversion as the benchmark 10-year Treasury yields dropped five basis points (bps) to 3.25% at the latest. The sour sentiment helps the US Dollar Index (DXY) to refresh its intraday high around 104.65, rising for the first day in three, by the press time.
Looking forward, multiple central bank policymakers are in the line for speeches and can exert additional downside pressure on gold prices if they push for aggressive rate hikes. Above all, Fed Chair Powell’s ability to tame recession fears and justify the biggest rate hike since 1994 will be needed by XAU/USD sellers.
Technical analysis
Gold justifies repeated failures to stay beyond the 200-DMA as it drops back towards six-week-old horizontal support around $1,805. Following that, the $1,800 threshold and the yearly low near $1,786 could lure the XAU/USD bears.
Meanwhile, a clear upside break of the 200-DMA hurdle, around $1,845 by the press time, may not invite gold buyers as a downward sloping trend line from early March and the 50-DMA could challenge the following upside momentum around $1,850 and $1,875 in that order.
Gold: Daily chart
Trend: Further downside expected
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