Gold Price Forecast: XAU/USD braces for another hit, with eyes on Powell and yields

Gold price faced rejection once again near $1,940 on Tuesday, as sellers barged on the back of an unstoppable rally in the US Treasury yields across the curve. The yields upsurge found fresh legs after Fed Chair Jerome Powell and his colleagues at the world’s most powerful central bank rooted for aggressive tightening to curb soaring inflation, hinting at a 50-basis points rate hike in May. The benchmark 10-year rates on the US government bonds hit the highest level since May 2019 at 2.39%, adding 10 bps on the day.

Gold price wilted to four-day lows of $1,910 before staging a decent comeback to $1,922 at the close. The bounce in gold price could be attributed to the choppy trading seen in the US dollar across the board amid the upbeat market mood. Investors cheered Fed policymakers confidence in the economy. Meanwhile, gold bulls found some comfort from a lack of progress in the Russia-Ukraine conflict and harsher Western sanctions on Russia.

In Wednesday’s trading so far, gold price is struggling to find any follow-through recovery momentum, as the yields continue to hold firmer, backed by the risk-on trading in the global equities. The Japanese government is likely to compile a new economic budget, in the face of the Ukraine crisis, which has buoyed the sentiment around the Asian markets. The US dollar remains on the defensive, keeping gold price afloat for now. Meanwhile, the developments surrounding the Russia-Ukraine saga will be closely followed, especially after Ukrainian President Volodymyr Zelenskyy said early Wednesday that “talks with Russia are difficult, at times confrontational” while the situation in the southern port city of Mariupol deteriorates.

In the day ahead, Powell’s speech will be eagerly awaited for fresh insights on the Fed’s tightening path. Fed Chair is due to speak at a virtual panel discussion titled "Emerging Challenges for Central Bank Governors in a Digital World" at the Bank for International Settlements (BIS). Also, in focus remains the NATO Summit scheduled on Thursday, where Zelenskyy is invited and may “fully participate” in discussions.

Gold Price Chart - Technical outlook

  

Gold: Four-hour chart

Gold price is defending the critical upward-sloping 200-Simple Moving Average (DMA) at $1,914 on the four-hour chart.

Bears need a four-hourly candlestick closing below the latter to resume the downward momentum.

The downside appears more compelling, as the Relative Strength Index (RSI) lies flattish below the midline.

Adding to it, the path of least resistance also appears south, as the 200-SMA support is the only critical line of defense for gold bulls.

On the other hand, a bunch of moving averages, including the 21, 50 and 100-SMAs, emerge as healthy resistance levels.

If gold price yields a downside break of the 200-SMA, then a test of the $1,900 barrier will be inevitable.

The March 16 lows of $1,895 could then come to the rescue of gold bulls. Further down, the February 24 low of $1,878 will come into play once again.

Alternatively, gold buyers need to find acceptance above the bearish 21-SMA at $1,928 to unleash the additional recovery towards the 50-SMA hurdle at $1,938.

The recent range highs around $1,941 will be put to test, as bulls set their eyes on the horizontal 100-SMA at $1,955.