Gold Price Forecast: XAU/USD pullback eyes $1,630 support on firmer USD, Fed bets

• Gold price prints mild losses while reversing from one-week high.
• DXY pares the first weekly loss in three amid geopolitical, market meddling concerns.
• Fed speakers’ absence, likely hawkish outcome from ECB could test XAU/USD bears.
• Preliminary readings of US PMI for October, Q3 GDP are also important for near-term directions.

Gold price (XAU/USD) remains pressured around the intraday low of $1,652, keeping the week-start pullback from a fortnight top, during early Monday morning in Europe. In doing so, the yellow metal justifies the firmer US dollar and the market’s cautious mood.

US Dollar Index (DXY) rises 0.30% intraday to 112.25 by the press time amid chatters surrounding Japan’s meddling in the market to defend the yen and challenges to the risk appetite.

That said, the news that both North and South Korea have exchanged warning shots near their disputed western sea boundary, published on Monday, also seemed to have favored the US dollar buyers of late. On the same line could be the fears that China President Xi Jinping won’t hesitate to escalate geopolitical matters with the US when it comes to Taiwan. The reason could be linked to Jinping’s dominating performance at the annual Communist Party Congress after winning the third term in a row. Additionally, ABC News quoted Ukrainian General Oleksandr Syrskiy citing fears of Nuclear war, which in turn might have recalled the US dollar buyers.

Recently, news that China announced covid lockdown in the factory hub Guangzhou weighed on the market sentiment and the XAU/USD prices. The latest jump in the market’s bets over the Fed’s 75 bps move in November, from 88% to 95%, also seemed to have drowned the gold prices.

Amid these plays, S&P 500 Futures print 0.50% intraday gains while the US 10-year Treasury yields remain offered around 4.17%, extending Friday’s losses from the 14-year high. That said, the US equities posted the largest weekly gains in four months in the latest amid previously receding fears of the Fed’s aggressive rate hike.

On Friday, the gold price rose heavily while portraying the first weekly gain in three as the hawkish Fed bets retreated after a mixed Fedspeak. St. Louis Fed President James Bullard said, “I want rates that put significant downward pressure on inflation.” On the same line, Chicago Fed President Charles Evans stated that they would need to raise rates further and hold them for a while. However, Nick Timiraos, Chief Economics Correspondent at The Wall Street Journal (WSJ) wrote that the Federal Reserve officials are barreling toward another interest-rate rise of 75 bps at their meeting in November and are likely to debate then whether and how to signal plans to approve a smaller increase in December.

Looking ahead, gold traders should expect further weakness amid dicey markets and challenges to sentiment. However, the absence of the Fed speakers and a likely hawkish outcome from the European Central Bank (ECB) could challenge the XAU/USD downside.

Technical analysis

Gold price retreats from the 21-DMA hurdle amid bearish MACD signals and sluggish RSI, which suggests the metal’s further declines towards the resistance-turned-support line from October 06, around $1,630 by the press time.

However, monthly horizontal support near $1,620, quickly followed by the yearly bottom of $1,614, could challenge the gold bears afterwards. In a case where the metal prices drop below $1,614, the $1,600 threshold and the 61.8% Fibonacci Expansion (FE) of June-October moves, near $1,565, lure the XAU/USD bears.

Alternatively, the 21-DMA and the 50-DMA, around $1,665 and $1,694 in that order, guard the short-term recovery of gold price.

The $1,700 round figure and the monthly high near $1,730 might be interesting to watch for further upside.

Gold: Daily chart

Trend: Limited downside expected