Gold Price Forecast: On its way to challenging the $1,800 threshold

XAUUSD Current price: $1,843.37

• Fed’s Loretta Mester revived speculation of a potential 75 bps rate hike.
• US Treasury yields are sharply down amid renewed risk-aversion.
• XAUUSD gains bearish momentum after breaking the former May monthly low.

Spot gold started the day positively, advancing to an intraday high of $1,865.43 a troy ounce, as demand for the greenback remained subdued. The latter returned with Wall Street’s open, as US indexes quickly trimmed early gains, while XAU/USD fell to $1,841.38, its lowest since early February. The catalyst for the latest round of risk aversion came from US Federal Reserve Cleveland President Loretta Mester, who said that a 75 bps rate hike is not out of the table “forever,” although adding that the current pace of hikes seems “about right.”

Meanwhile, US government bond yields are sharply down amid renewed concerns about slowing economic progress. The yield on the benchmark 10-year Treasury note fell to 2.942%, holding nearby mid-American session. Investors’ focus is on the US Consumer Price Index, as the country will publish an update on inflation on Wednesday. The annual CPI growth is expected to slow down to 8.1% in April from a multi-decade high of 8.5% in the previous month.

Gold Prices short-term technical outlook

The daily chart for XAUUSD shows that it’s down for a second consecutive day, holding near the aforementioned low. Technical indicators turned lower near oversold readings, in line with another leg south. In the same chart, the bright metal has fallen further below its 20 and 100 SMAs, with the shorter accelerating south above the longer one. The 200 SMA provides dynamic support at around $1,835.60.

The 4-hour chart shows an increased bearish momentum, as technical indicators turned sharply lower within negative levels, now approaching oversold readings.  At the same time, the 20 SMA accelerated slide above the current level and below the longer ones, reflecting strong selling interest. The former May monthly low at 1,850.35 is now the immediate resistance level.

Support levels: 1,835.60 1,825.40 1,813.70

Resistance levels: 1,850.35 1,862.10 1,873.00  

View Live Chart for the XAU/USD