Gold Price Forecast: XAU/USD gearing up for a big breakdown towards $1,615

Gold price is seen in the red for the first time this week, as Wednesday sees mixed market sentiment so far. The safe-haven US dollar is staging a minor comeback, drawing support from fresh concerns over China’s covid resurgence and aggressive Fed and ECB tightening bets. Investors also remain anxious ahead of the inflation readings from the UK, Europe and Canada while British political uncertainty keeps them on tenterhooks. Surging US Treasury yields also weigh on the non-yielding bullion price, as they take the lead from solid gains in the US S&P 500 futures. Strong corporate earnings results from Goldman Sachs, United Airlines Holdings and Netflix keep the sentiment around the US futures lifted.  

Looking ahead, the market mood could turn sour if the inflation prints from both sides of the Atlantic spur big rate hike calls, in turn, amplifying recession fears. The ECB is widely expected to announce a 75 bps rate hike next week while a super-sized rate hike is a done deal for the Fed. In the case of risk aversion, the dollar bulls will regain control and smash the USD-price yellow metal towards the lowest level seen this year at $1,615.

Also read: Gold: The downtrend may be expected to continue

XAU/USD failed again to extend the recovery from two-week lows of $1,640, as risk-on mood dominated amid the UK fiscal policy U-turn and robust US earnings reports. The renewed uptick in the US rates hampered the bullish bets on the bright metal. Yields surged following the hawkish commentary from the Fed policymakers, which had a significant impact in the absence of top-tier US economic releases. Minneapolis Fed President Neel Kashkari said that he is not ready to declare a pause in rate hikes until compelling evidence shows that core inflation has peaked. Meanwhile, the head of Atlanta Fed, Raphael Bostic, said that Inflation is too high and needs to be controlled, suggesting steeper rate hikes on the way. The downside in the metal, however, remained cushioned by the extended dollar decline, in the face of the global risk rally, further seen on Wall Street.

Gold price technical outlook: Daily chart

The near-term bearish outlook on gold price remains unchanged even though the metal has made higher lows on the daily chart so far this week.

The new support, in the rising trendline, now at $1,642, still appears at risk amid a bearish 14-day Relative Strength Index (RSI).

Meanwhile, sellers continue guarding the mildly bearish 21-Daily Moving Average (DMA) at $1,669.

A sustained break above the latter on a daily closing basis is needed to initiate a meaningful recovery towards the $1,700 barrier.

The immediate resistance, however, is seen at the previous intermittent lows at around $1,660.

Meanwhile, acceptance below the $1,640 demand area is critical to kick off a fresh downswing towards the $1,600 threshold.

Ahead of that, the 2022 lows of $1,615 will challenge bearish commitments.