Gold Price Forecast: XAU/USD awaits bear pennant confirmation for a fresh downswing

Gold price is feeling the pull of gravity once again on Thursday, reverting to 29-month lows of $1,654, as the demand for the US dollar remains unabated amid escalating geopolitical tensions surrounding Russia and the West over Ukraine. Meanwhile, the hawkish Fed outlook also keeps investors on edge, as they prepare for higher borrowing costs. The Asian equities take the negative lead from their Wall Street peers while the US S&P 500 futures lose 0.60% on the day. The US Treasury yields regain the upside traction, with the benchmark 10-year rates heading back towards 11-year highs of 3.64%. Investors assess the implications of the aggressive Fed rate hike, in the face of renewed Russia’s aggression.

The non-interest-bearing yellow metal appears vulnerable with more tightening coming in from Switzerland and the UK in the session ahead. The Swiss National Bank (SNB) and the Bank of England (BOE) are widely expected to hike rates by 75 bps, respectively. The policy guidance will hold the key for the market. Meanwhile, should the tensions between Russia and the West intensify, the dollar could see the additional upside, as a flight to safety may remain full steam. Therefore, XAU/USD appears in a lose-lose situation in the near term.

Also read: BOE Interest Rate Decision Preview: GBP/USD braces for volatility storm, eyeing a 75 bps hike

The bullion enjoyed massive volatility and swung in either direction following the expected 75 bps Fed rate hike decision. In an initial reaction to the Fed announcement, the metal slumped to a fresh two-year low of $1,654 before reversely challenging the $1,690 hurdle during Fed Chair Powell’s press conference. The dollar corrected from 20-year highs of 111.58 after Powell and company projected the terminal rate of 4.6% in 2023, well below the highly anticipated 5% figure. Yields also pulled back quickly offering the much-needed respite to gold bulls. However, XAU/USD closed Wednesday with sizeable gains, drawing support from the renewed geopolitical fears. Russian President Vladimir Putin announced in early European hours that he had ordered partial military mobilization in Ukraine. Russia’s aggression was strongly condemned and opposed by the West.

Gold price technical outlook: Daily chart

Gold price briefly breached the rising trendline support at $1,664 on Wednesday but averted confirmation of a bear pennant by closing at the day around $1,674.

This Thursday, the price hovers below the abovementioned support amid renewed selling interest. Daily closing below the support is needed to validate the bearish continuation pattern.

The $1,650 psychological level will be the immediate line of defense, below which sellers will yearn for a sustained move towards the next support at around $1,643.

The Relative Strength Index (RSI) points south towards the oversold territory, near 34.00, suggesting that there is more room for the downside.

Conversely, any recovery attempts will need acceptance above the recent range highs near $1,680. The next upside barrier is aligned at around $1,700.

Daily closing above the latter is critical to unleashing the further recovery towards the bearish 21-Daily Moving Average (DMA) at $1,704.