Gold Price Forecast: XAU/USD pares losses above $1,700 as risk-aversion stalls, Fed eyed

• Gold price picks up bids to consolidate the weekly losses, stays mildly bid during the first positive day in three.
• Markets brace for the Fed’s 75 bps rate hike as yields, S&P 500 Futures recover amid sluggish session.
• US President Biden’s readiness to talk to China’s Xi adds to the pre-Fed optimism.
• XAU/USD could rise further if recession woes stop the Fed from surprising markets.

Gold Price (XAU/USD) refresh intraday high around $1,720 as the metal braces for the Federal Open Market Committee (FOMC) meeting on early Wednesday. In addition to the pre-Fed consolidation, the market’s cautious optimism also helps the bullion to snap the two-day downtrend.

US President’s readiness for a virtual meeting with his Chinese counterpart Xi Jinping, on Thursday, appears to have recently underpinned the market’s cautious optimism. The risk-on mood could be witnessed in the 0.80% intraday gains of the S&P 500 Futures, as well as the US 10-year Treasury yields’ rebound, up 2.5 basis points (bps) to 2.81% by the press time.

It’s worth noting, however, that the recession fears join the likely hawkish expectations from the Fed to keep XAU/USD prices under pressure. The fears of economic slowdown intensified after the International Monetary Fund (IMF) cut its global growth forecast (once again) this year, to 2.9% from 3.6% forecasted in April. The Washington-based organization also raised concerns over more economic hardships amid a full cut-off of Russian gas to Europe and a 30% drop in Russian oil exports, both of which are looming. It should be noted that the disappointing results from the global retailer Walmart also contributed to the recession fears.

Elsewhere, the US CB Consumer Confidence fell for a third consecutive month in July, to 95.7 from 98.4 prior. Further, the US New Home Sales dropped to 0.59M for June versus 0.66M expected and 0.642M previous readout. On the same line, Richmond Fed Manufacturing Index rose to the highest level since April, to 0 from -13 expected and -9 prior (revised up from -11).

On Tuesday, Wall Street closed in the red and the US Treasury yields remain mostly pressured while portraying the biggest difference between the 2-year and the 10-year bond coupons since the year 2000, which in turn highlighted the rush towards risk-safety.

While the Fed’s ability to tame inflation and still keep the growth prospects intact will be important for gold traders, US Durable Goods Orders for June, -0.4% forecast compared to 0.8% prior, could also entertain traders.

Also read: Gold Price Forecast: Pressure mounts as headaches arise

Technical analysis

Gold’s rebound approaches the $1,720 hurdle, comprising the 61.8% Fibonacci retracement of the July 13-21 downside and the weekly resistance line. The recovery moves, however, lacks courage as shown by the RSI and the MACD.

Even so, an upside break of the $1,720 resistance confluence could direct XAU/USD towards a two-week-old resistance line near $1,735 before convincing the bulls.

On the contrary, the 200-HMA and 50% Fibonacci retracement level restrict the precious metal’s short-term downside to around $1,713.

Following that, a horizontal area from July 14, around $1,700-1697, could probe gold sellers before directing them to the yearly low surrounding $1,680.

Overall, gold prices remain pressured despite the recently easing bearish bias.

Gold: Hourly chart

Trend: Further weakness expected