Gold Price Forecast: Hawkish Powell could revive XAU/USD downtrend towards $1,729

Gold price is edging lower near $1,750, snapping a three-day recovery, as bulls surrender heading into the Jackson Hole showdown. The US dollar is finding renewed demand on early Friday, looking to extend the previous rebound amid cautious optimism. Despite the positive performance on Wall Street in the US last session, Asian stocks are struggling to capitalize, in the face of China’s growth concerns. The world’s second-largest economy battles drought and covid lockdowns, which has raised clouds over its growth prospects. Additionally, investors remain unnerved ahead of Fed Chair Jerome Powell’s speech at 1400 GMT on Friday, as the second day of the Jackson Hole Symposium gets underway. The US Treasury yields are also seeing a fresh uptick amid expectations that Powell could spill out hawkish beans on the size of the Fed’s rate hike move. Fed President is also expected to dampen speculation of lowering rates next year, as risks to growth mount. The US Fed fund futures now show a 61% chance of a 75 bps rate hike in September, up from around 41% seen a week ago. Gold traders also await the Fed’s preferred inflation gauge, PCE Price Index, which will be published at 1230 GMT alongside other minority reports.

Also read: Jackson Hole Symposium Preview: Will Powell power dollar bulls?

On Thursday, the dollar pulled back sharply in tandem with the yields, as investors made position readjustments ahead of the key Fed conference. The recovery in the bright metal, therefore, gained traction, as bulls hit five-day highs at $1,767. The upbeat tone on Wall Street indices added to the weight on the safe-haven dollar. Although mixed US GDP revision and weekly Jobless Claims and conflicting Fed commentary helped the buck stage a sharp recovery, which dragged gold price back below the $1,760 level. Philadelphia Fed President Patrick Harker said that a 50 bps rate hike would still be a substantial move. Meanwhile, St. Louis Fed President James Bullard sounded hawkish, citing that he likes the idea of front loading; it ‘shows you are serious about inflation fight’.

Gold price technical outlook: Daily chart

Gold price failed to sustain above $1,760, the 38.2% Fibonacci Retracement (Fibo) level of the recovery from yearly lows of $1,681 to the August 10 high of $1,808, halting a three-day recovery from monthly lows of $1,728. Daily closing above the latter is needed to extend the uptrend.

The next powerful upside barrier is aligned around $1,769, where the 21 and 50-Daily Moving Averages (DMA) hang around.

Acceptance above that supply zone will call for a test of the 23.6% Fibo resistance of the same ascent at $1,778.

On the flip side, bulls could find immediate cushion around the previous day’s low of $1,750, below which the 50% Fibo level at $1,744 will be challenged.

Selling pressure could intensify below the latter, opening floors towards $1,729, which is the golden ratio – 61.8% Fibo level.

The 14-day Relative Strength Index (RSI) is turning lower below the midline, suggesting that bears could retain control in the near term.

Further, the 21 and 50 DMAs crossover seems like a bear cross, which could likely keep sellers hopeful.