Gold Price Forecast: XAU/USD bulls could come up for last dance ahead of Fed

Gold Price is licking its wounds near three-month lows just above the $1,950 psychological barrier, unable to find a convincing motive to stage a comeback. The US dollar has stalled its corrective pullback and heads back towards multi-year highs, keeping gold bulls at bay. The latest leg up in the dollar could be attributed to the ongoing uptrend in the US Treasury yields. The benchmark 10-year US rates briefly recaptured the 3% key level, as the Fed is set to begin its two-day monetary policy meeting later this Tuesday. The world’s most powerful central bank is widely expected to hike the key policy rate by 50 bps when it concludes its policy meeting on Wednesday. Speculative interests are now calling for a 75 bps rate hike at its June announcement.

Looking forward, the US dollar could extend its correction, as investors resort to repositioning ahead of the all-important Fed event. Further, markets weigh the downbeat US ISM and S&P Global Manufacturing PMI reports, which could keep the sentiment around the greenback undermined. The US calendar remains light this Tuesday, with the only JOLTs job openings data of relevance. The Fed expectations, however, will continue to drive the gold price action.

Gold Price Chart: Daily chart

The daily chart shows that Gold Price is finding some bids in the $1,950 area, which could prompt a comeback towards the daily highs of $1,867.

The $1,870 round figure could then be next on buyers’ radars. Acceptance above the latter will fuel a fresh advance towards the mildly bullish 100-Daily Moving Average (DMA) at $1,879.

The 14-day Relative Strength Index (RSI) has turned flat just above the oversold region, suggesting that a rebound could be in the offing.

With the hawkish Fed bets, however, in play, any recovery attempts are likely to be temporary.

If the $1,950 level gives way amid a selling resurgence, then a sharp sell-off towards the rising 200-DMA at $1,834 will be inevitable.

Ahead of that, the $1,940 level could come to the rescue of gold bulls.