Gold Price Forecast: Downside appears more compelling for XAU/USD, NFP in focus

Gold (XAU/USD) holds the lower ground below the $1700 level, as Fed Chair Jerome Powell’s dismissal of the bond market turmoil triggered a fresh sell-off in the Treasuries, which drove the yields higher. US stocks tumbled on concerns about the growth and inflation forecasts, which boosted the safe-haven US dollar while knocking-off gold below $1700. Investors remain unnerved, as they believe that the rallying yields likely signals overheating of the economy. The benchmark 10-year Treasury yields rallied 4% and recaptured 1.50% on Powell’s comments while the US dollar index rose to three-month highs above 91.50.

Heading into the critical US NFP release, gold looks vulnerable, as the dollar holds firmer in tandem with the yields. If the headline NFP figures disappoint, the risk-off action in the global equities could intensify, bolstering the haven demand for the greenback, which could cause more pain for gold. The US economy is expected to add 182K jobs in February vs. the previous +49K figure. Also, the updates on the US $1.9 trillion stimulus will be closely followed as its nears approval by the Senate.

Gold Price Chart - Technical outlook

Gold: Four-hour chart

Gold’s four-hour chart shows that the price is testing the lower band of a potential falling wedge, with the key support placed at $1687.

A four-hour candlestick closing below the latter is needed to confirm the downside break, paving way for a drop towards the June 2020 low of $1671.

On the flipside, recapturing the $1700 level is critical to unleashing further recovery gains.

The confluence of the bearish 21-simple moving average (SMA) and the falling wedge resistance at $1717 is likely to be a tough nut to crack for the XAU bulls.

The Relative Strength Index (RSI) remains within the oversold territory, suggesting that a minor bounce could be in the offing before the downside resumes.