Gold Price Forecast: XAU/USD bulls’ fate hinges on key US data, Fed minutes

The ongoing narrative of earlier rate hikes, courtesy of the renomination of Jerome Powell as the Fed Chair, continued to hammer gold price on Tuesday. The bright metal extended its rout into the fourth straight day, reaching the lowest levels in three weeks at $1,782 before recovering to $1,790 at the close. The selling pressure intensified in gold price after stops got triggered on a breach of the $1,800 psychological level. Expectations of the hastening of the Fed’s tapering combined with a sooner rate hike bolstered the rally in the US Treasury yields, which drove the US dollar to fresh 16-month highs of 96.61. The mixed performance in the Wall Street indices further added to the greenback’s demand as a safe haven.

Gold bears are taking a breather on Wednesday, contemplating the next move ahead of a bunch of critical US data and Fed minutes. The FOMC minutes could shed fresh insights on the central bank’s rate hike outlook, in the wake of the rising inflationary pressures and robust economic recovery. Heading into the key event risks, investors assess the impact of a sooner Fed’s tightening on the economic growth, keeping them unnerved. Meanwhile, the European covid curbs also sap the market’s confidence. The risk-off market mood boosts the safe-haven flows into the US Treasuries, fuelling a fresh retreat in the yields while offering some reprieve to gold bulls. Ahead of the FOMC minutes, the US PCE Inflation, GDP and Durable Good data will influence the dollar and gold valuations as well.

Gold Price Chart - Technical outlook

Gold: Four-hour chart

Gold price is carving out a bear flag formation on the four-hour chart, given the latest uptick, which followed Tuesday’s tumble.

The Relative Strength Index (RSI) has recovered from extremely oversold conditions, offering some breathing space yet again for gold sellers.  

Therefore, a four-hourly candlestick closing below the rising trendline support at $1,790 is needed to confirm a downside breakout from the bearish continuation pattern.

Bears will then keep their eyes on the pattern target measured at $1,707. However, the November 4 lows of $1,769 could challenge the bullish commitments before. The $1,750 psychological level could be next on their radars.

On the flip side, the rising trendline resistance at $1,798 will cap the recovery attempts. Acceptance above the latter will invalidate the bearish formation, opening doors for a retest of the horizontal 200-Simple Moving Average (SMA) at $1,806.

However, with the 21 and 100-SMAs bearish crossover playing out, the downside appears more compelling for gold price.