Gold Price Forecast: The dollar steals the show as fears rule financial markets

XAUUSD Current Price: $1,876.09

• Market players got a reality check after the BOE warned about recession in the UK.
• US government bond yields soared to levels last seen in 2018, 10-y yield hits 3.10%.
• XAUUSD retreated sharply from above $1,900, reaffirming the dominant bearish strength.

Spot gold is trading in negative territory after peaking at $1,909.72 a troy ounce in the Federal Reserve monetary policy decision aftermath. Wall Street reacted positively to the announcement, as US policymakers refrained from announcing a more aggressive monetary policy. Nevertheless, the US central bank hiked rates by 50 bps, the largest hike in twenty years, and announced it would start quantitative tightening in June.

The Bank of England announced its decision on monetary policy on Thursday, and opposite to the Fed, UK policymakers downwardly reviewed growth estimates while hiking rates by 25 bps. The central bank warned the local economy would slide into recession this year as higher energy prices are pushing inflation to multi-decade highs. The market flipped to risk-off and rushed away from high-yielding assets.

US stock indexes collapsed, while government bond yields hit fresh multi-year highs. The 10-year Treasury note yielded as much as 3.10%, its highest since 2018, while that on the 2-year note reached 2.74%. As a result, the greenback soared against all of its major rivals.

XAUUSD Technical Outlook

Gold price is currently at around $1,875.00, and the daily chart shows that bears are still in full control of the metal. It is trading below a mildly bullish 100 SMA after being unable to retain gains above it. The 20 SMA heads firmly lower well above the current level, while technical indicators are directionless near oversold readings, in line with the dominant bearish trend.

The 4-hour chart shows that XAUUSD is now hovering around a flat 20 SMA, while the 100 SMA crossed below the 200 SMA, both far above the current level. Technical indicators, in the meantime, retreated from overbought readings and are heading firmly lower, with the RSI currently at 45, hinting at further declines in the near term.

Support levels: 1,861.40 1,850.30 1,843.80  

Resistance levels: 1,883.10 1,895.20 1,908.50

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