Gold Price Forecast: XAU/USD hit record high on US banking jitters and potential Fed pause

Gold price fades an intraday bullish spike to the $2,078-$2,079 region, or a fresh record high and retreats to the lower end of its daily range during the Asian session on Thursday. Without any fresh trigger, the sharp XAU/USD pullback could be solely attributed to some profit-taking and is likely to remain limited amid worsening economic conditions. The Federal Reserve (Fed) Chair Jerome Powell warned on Wednesday that economic growth was cooling and credit conditions were likely to tighten further due to growing pressure on banks. This comes amid signs of stress at another US regional bank, PacWest Bancorp, which sparks fears of a full-blown banking crisis in the United States (US) and should continue to benefit the safe-haven precious metal.

The prevalent US Dollar (USD) selling bias might also support the Gold price. The USD Index (DXY), which tracks the Greenback against a basket of currencies, drifts lower for the third successive day and languishes near the weekly low touched in the aftermath of the Fed decision on Wednesday. It is worth recalling that the US central bank, as was widely anticipated,  hiked interest rates by 25 bps and opened the door for a possible pause in June. In the post-meeting presser, Powell signalled that the Fed was close to hitting the terminal rate of the current hiking cycle, though it did not explicitly confirm a pause. Nevertheless, the dovish hike, along with concerns over the US debt ceiling, keeps the US Treasury bond yields depressed and undermines the buck.

The fundamental backdrop suggests that the path of least resistance for Gold price is to the upside. The US inflation is still trending well above the Fed's target rate. This could result in further policy tightening by the US central bank, which, along with the prospects for more interest rate hikes by the European Central Bank (ECB) and the Bank of England (BoE), could act as a headwind for the non-yielding yellow metal. Traders might also refrain from placing aggressive bets and now look to the closely-watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Friday. This will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the US Dollar-denominated commodity.

Technical Outlook

From a technical perspective, any subsequent slide below the Asian session low, around the $2,038 area, now seems to find decent support near the $2,020 horizontal level. This is followed by the $2,012-$2,010 resistance breakpoint and the $2,000 psychological mark. The latter should act as a key pivotal point, which, if broken decisively, might prompt some technical selling and drag Gold price back towards the $1,980-$1,970 strong horizontal support.

Some follow-through selling will negate the positive outlook and shift the near-term bias in favour of bearish traders, making Gold price vulnerable to accelerate the slide towards the $1,950-$1,948 region. The area coincides with the upward-sloping 50-day Simple Moving Average (SMA), below which the XAU/USD could drop to challenge the 100-day SMA, currently pegged just ahead of the $1,900 round-figure mark.

Conversely, the $2,070-$2,080 region might continue to act as an immediate strong barrier ahead of the $2,100 mark. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders and set the stage for extending the recent well-established uptrend over the past six months.