Gold Price Forecast: Key $1,838 support could be at risk ahead of US GDP

Gold Price ended it’s five-day winning streak on Wednesday after facing stiff resistance near the $1869 region, although the losses remained capped at the critical 200-Daily Moving Average (DMA) at $1,839. Gold’s retreat from two-week highs in the first half of the day was led by a broad-based US dollar bounce, despite weaker Treasury yields and a cautious market mood. Investors resorted to repositioning ahead of the main event risk of this week, the May Fed meeting’s minutes. The US rates continued extending lower, as 50 basis points rate hikes at the next two meetings each are widely baked in while the recent cautious commentary by Atlanta Fed President Raphael Bostic and Chair Jerome Powell doused aggressive Fed tightening expectations.

The same was confirmed by the Fed minutes, which showed all members supported plans to reduce the balance sheet and supported the view a 50 bps hike would be appropriate at the next couple of meetings. The document also revealed that the policymakers considered it appropriate for sales of mortgage-backed securities (MBS). But that option consideration failed to revive the hawks and the dollar lost legs yet again while Wall Street got a boost. The renewed weakness in the buck, helped the rebound in the bright metal, allowing it to settle the day above $1,850.

This Thursday, XAUUSD is seeing fresh selling pressure, reversing the previous rebound, as the US dollar seems to have found a floor amid a return of risk-off flows on global markets. China’s Premier Li warned of the economic damage from the latest covid outbreaks-induced extended lockdowns. Further, fears over the impact of the central banks’ tightening on global growth also continue to temper the market mood, boding well for the safe-haven dollar.

With the Fed minutes out of the way, the next of relevance for gold traders remains the US Q1 GDP revision and PCE inflation. The GDP revision could be closely eyed amid looming recession risks in the US. The data could have a significant impact on the dollar valuations and, in turn, on the yellow metal.

Gold Price Chart: Four-hour chart

Gold Price is teasing a downside break from a symmetrical triangle on the four-hour chart, at the moment.

If bears yield a break below the rising trendline support at $1,842 on a four-hourly candlestick closing basis, then it would confirm a triangle breakdown.

The immediate downside target is seen at the rising 50-Simple Moving Average (SMA) at $1,838. A sustained move below the latter is needed for sellers to resume the renewed downside towards $1,800.

The Relative Strength Index (RSI) points south below the midline, allowing room for more declines.

On the other side, strong resistance is placed at $1,856, which is the horizontal 21-SMA, above which the falling trendline hurdle at $1,863 will get tested.

After the relentless surge, gold bulls could see a minor pullback from two-week highs, with the immediate support of the 21-DMA likely to be tested.