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Gold Price Forecast: XAU/USD eyes a retest of multi-month lows below $1,800

  • Gold Price looking to retest $1,800 as the US dollar index finds its feet.
  • Treasury yields rebound despite souring market mood, weighing on XAU/USD.
  • The path of least resistance appears to the downside for Gold Price.

The Gold Price recovery from four-month lows of $1,787 lost in the first half of Tuesday’s trading, as sellers re-appeared at the critical $1,836 supply zone. The renewed downside in Gold Price forced bulls to give up control, as it settled at $1,815, down nearly $20 from the intraday highs.

What drove the two-way businesses in Gold Price? Well, its not hard to predict, as the broader market sentiment and the US dollar price action remain the key primary catalysts. The US dollar extended its correction from two-decade highs amid a four-day recovery rally in the global equities and optimism on Shanghai reopening from the covid outbreaks-induced lockdowns. The DXY correction prompted gold bulls to build onto its previous recovery, although rebounding US Treasury yields capped the upside in the bright metal.

Further, stronger than expected US Core Retail Sales combined with positive revisions to the previous release added to the inflation concerns, which bolstered the Fed’s rate hike expectations. Fed Chair Jerome Powell, however, failed to inspire the USD bulls, as he reiterated that the US central bank officials will keep tightening policy until inflation comes down in "a convincing way." The positive risk sentiment continued to keep the dollar pressured but the hawkish remarks from the Chicago Fed President Charles Evans and firmer yields reinforced the downside pressure on Gold Price.  

This Wednesday, Gold Price is extending the previous decline as Treasury yields hold higher ground while the Asian equities have turned south, ditching Wall Street’s strong gains. Disappointing Chinese and Australian economic data, surging covid cases in Beijing and the hawkish Fed expectations are denting the market mood, as inflation and growth fears re-emerge. The US dollar, therefore, is seeing fresh haven demand, also backed by the hawkish Fed tightening bets. The developments around Eastern Europe and Chinese covid lockdowns will influence the market’s risk perception amid a lack of top-tier economic releases from the US. Although the inflation readings from the UK and Euro area will be closely followed for any significant impact on risk sentiment.

Gold Price Chart: Daily chart

Having faced rejection at the critical 200-Daily Moving Average (DMA) of $1,836, Gold Price changed its course and resumed the ongoing downtrend.

The immediate support is now seen at the $1,800 mark, below which the multi-month lows of $1,787 will be probed.

The 14-day Relative Strength Index (RSI) is inching lower while sitting just above the oversold region, suggesting that there is more room for the downside.

The 21 and 100-DMAs bearish crossover also remains in play, keeping gold sellers hopeful.

The last line of defense for gold buyers is seen at the 2022 lows of $1,780, reached on January 28.

On the flip side, any recovery attempt will eye a sustained break above the falling trendline resistance at $1,821.

Gold bulls will then look to challenge the 200-DMA once again. Recapturing the latter on a daily closing basis is critical to initiate any meaningful recovery.

Author

Dhwani Mehta

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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