Gold Price Forecast: $1,903 appears at risk for XAU/USD as Fed minutes take center stage

Gold price continued to witness decent volatility on Tuesday while maintaining its recent trading range between $1,950-$1,915. The main catalysts behind the gold price action were the hawkish Fed outlook and the worsening Russia-Ukraine geopolitical situation. In the first half of the day, gold price gradually retraced the previous gains amid a better market mood, despite markets anticipating fresh Western sanctions against Russia over its attacks on Ukraine’s innocent civilians over the weekend. Meanwhile, the US Treasury yields attempted a steady recovery, as the US dollar held firmer.

Gold price briefly spiked to daily highs of $1,945 on mixed US S&P and ISM Services PMI reports but the tide quickly turned in favor of bears, as the US dollar surged alongside yields on hawkish comments from Fed Vice Chairwoman Lael Brainard. Brainard hinted at a potential balance sheet run-off and bigger rate increase as early as the May meeting, which smashed the non-interest-bearing gold price. XAUUSD fell as lows as $1,918, in the aftermath of the hawkish remarks, as markets already price in a 70% chance of a 50-basis points Fed rate hike next month.

Gold price is looking to extend the previous sell-off on Wednesday, as the Fed’s policy expectations take center stage heading into the release of the March meeting’s minutes. All eyes will remain on the Fed officials’ debate about the prospects of aggressive tightening in the coming months while any hints on the balance sheet reduction will be also closely eyed.

The bond rout extends, with spiking US Treasury yields across the curve, keeping gold sellers in control so far this Wednesday. Meanwhile, investors remain worried about escalating Ukraine conflict and rising covid cases in China, which is having a significant impact on the world’s second-biggest economy.

Gold: Daily chart

Gold’s daily chart shows that the price is challenging the lower boundary of the recent trading range near the $1,915 region.

A sustained break below the latter will call for a test of the ascending 50-Daily Moving Average (DMA) at $1,903.

The next critical support is seen at the March 29 low of $1,890.

The 14-day Relative Strength Index (RSI) is inching lower while just beneath the midline, suggesting that there is room for the additional downside.

On the upside, the 21-DMA at $1,941 will be the first test for gold bulls on the road to recovery, above which the previous day’s high of $1,945 will be challenged.

Acceptance above the latter will expose the previous year’s high at $1,960, which will emerge as a tough nut to crack for gold buyers.