Gold Price Forecast: XAU/USD seems vulnerable near monthly low, break below $1,890 awaited

• Gold came under fresh selling pressure on Wednesday and was pressured by a combination of factors.
• Aggressive Fed rate hike bets, the uninterrupted USD rally acted as a headwind for the commodity.
• Deteriorating global economic outlook, inflation concerns could lend some support to the metal.

Gold witnessed some selling during the Asian session on Wednesday and reversed the previous day's modest bounce from the $1,890 region, or a nearly one-month low. The recent hawkish comments by influential FOMC members, including Fed Chair Jerome Powell, reaffirmed expectations for a more aggressive policy tightening by the US central bank. This, in turn, continued acting as a headwind for the non-yielding yellow metal. The markets now expect the Fed to raise interest rates by 50 bps at each of its next four meetings in May, June, July and September. Apart from this, fears of stalling global growth boosted the US dollar's status as the reserve currency and pushed it to the highest level since March 2020. Sustained USD buying was seen as another factor that weighed on the dollar-denominated commodity.

The downside, however, seems cushioned amid the deteriorating global economic outlook, which weighed on investors' sentiment and could benefit the safe-haven gold. Investors remain worried that Russia could follow through on its threat to halt gas flows to countries that refuse to pay for fuel in roubles. In fact, Russia will stop supplying gas to Poland and Bulgaria on Wednesday. The latest development fueled fears that Russia would cut off supplies to Europe and impact the region's economic growth. Moreover, prolonged COVID-19 lockdowns in China to curb the latest outbreak further dampened the market mood. Apart from this, the continuous rise in inflationary pressures could also lend support to the XAU/USD, which is considered a hedge against rising prices. This warrants some caution before placing aggressive bearish bets.

Market participants now look forward to second-tier US economic releases for some impetus later during the early North American session. The data might influence the USD price dynamics, which, along with the broader market risk sentiment, should allow traders to grab some short-term opportunities around gold.

Technical outlook

From a technical perspective, the metal's inability to capitalize on the move and acceptance below the $1,900 mark favours bearish traders. Sustained weakness below the $1,890 horizontal support will reaffirm the negative bias and pave the way for additional losses. Gold prices could then accelerate the fall towards the 100-day SMA, currently around the $1,875 region. Some follow-through selling should pave the way for a fall towards intermediate support near the $1,850-$1,848 zone en-route the very important 200-day SMA, currently near the $1,833-$1,832 area. On the flip side, the overnight swing high, around the $1,911 region, now seems to act as an immediate hurdle ahead of the $1,918 horizontal level. Sustained strength beyond might trigger a short-covering move towards the $1,940 region, above which the recovery momentum could get extended to the $1,962 resistance zone.