Gold Price Forecast: XAU/USD could challenge $1,750, with big Fed rate hike bets back in play

Gold price witnessed a dramatic U-turn from monthly highs on Friday, as sellers continued to defend offers just shy of the $1,800 mark. The bright metal fell as low as $1,765, beaten down on an outstanding US Nonfarm Payrolls report. The headlines payrolls unexpectedly doubled up to 528K in July vs. 250K expected and 398K previously revised. The Unemployment Rate eased to 3.5% in July vs. 3.6% expected. The average hourly Earnings outpaced expectations although the Labor Force Participation Rate came in a tad lower at 62.1% in the reported period. The upside surprise in the NFP figures shot the 75 bps September Fed rate hike expectations to roughly around 70% vs. 47% pre-data release. In response, the US Treasury yields jumped and drove the dollar higher alongside. The benchmark 10-year rates recaptured the key 2.70% level to reach two-week highs at 2.87%. The big Fed rate hike bets spooked the sentiment around the US stocks amid looming recession fears, which helped limit the losses in the bullion.

Also read: Gold Weekly Forecast: Recovery could end if US CPI data confirms 75 bps Fed hike

Fed policymakers speaking over the weekend, supported super-sized rate hikes and maintained that controlling inflation remains the world’s most powerful central bank’s top agenda. Meanwhile, attention now turns towards the critical US inflation data due this Wednesday, which could likely cement a 75 bps Fed rate hike next month. At the moment, markets remain cautious amid ongoing US-China tensions and Italian political drama. Further, investors reassess the risks of a more prolonged fight by the major global central bankers to tame inflation. The greenback could regain the upside traction amid unnerved markets and aggressive Fed tightening calls. The non-interest-bearing gold is set to suffer in the lead-up to the US inflation release.

Gold price technical outlook: Daily chart

Despite Thursday’s closing above the critical downward-sloping 50-Daily Moving Average (DMA), then at $1,791, bulls failed to capitalize on the upside break.

The renewed downside has opened up floors for a retest of the $1,750 psychological barrier. Ahead of that, buyers could challenge the August 3 high of $1,754.

The 100 DMA is on the verge of crossing the 200 DMA for the downside, which if materializes could confirm a bear cross.

However, the 14-day Relative Strength Index (RSI) has stalled its descent, turning flattish just above the midline, still backing XAU bulls.

Buyers need acceptance above the $1,800 mark to continue with its recovery momentum. The next stop for bulls is seen at the horizontal trendline resistance connecting the July 5 high at $1,812.