Gold Price Forecast: XAU/USD’s dead cat bounce could seek validation at $1,836

Gold Price is licking its wounds on the final trading day of the week, which has not been very kind for gold bulls. After the previous 2% sell-off and fresh three-month lows of $1,810, the bright metal is trying its luck with a minor recovery amid a turnaround in risk sentiment. The improving market mood is triggering a pullback in the US dollar index from two-decade highs of 104.93. The Asian stocks and the US equity futures are breathing a sigh of relief, anticipating the end of the week flows to offer some comfort after Thursday’s bloodbath.

Markets went into a tailspin after hot US inflation data renewed fears over global economic slowdown, as the data bolstered the Fed’s tightening expectations. Aggressive Fed’s rate hike outlook, China’s covid lockdowns and the Ukraine crisis threatened a likely recession, fuelling a classic risk-off market profile. ‘Sell everything’ mode remained in vogue, as investors trusted the only safety net in the dollar to protect their capital. The tech stocks-led rebound in Wall Street indices also failed to calm nerves, keeping the dollar dominance intact at gold’s expense. Gold Price refreshed three-month lows of $1,821, losing roughly 2% on the day.

Going forward, it remains to be seen if XAU/USD can sustain the rebound, as the US Treasury yields trade almost 2% across the time curve, at the time of writing. Also, the broader market sentiment will play its part in influencing the dollar moves, as investors await the US Michigan Preliminary Consumer Sentiment data due later this Thursday. The data is expected to show the consumer sentiment likely to have dipped to 64.0 in March.

Gold Price Chart: Daily chart

Gold Price closed below the critical 200-Daily Moving Average (DMA) at $1,836 for the first time since February 3 on Thursday, flashing a red signal for market participants.   

With the 14-day Relative Strength Index (RSI), however, turning flat above the oversold region, a minor rebound cannot be rebound in the day ahead.

The sharp sell-off in Gold Price could well justify a minor corrective pullback towards the abovementioned key support, now turned resistance.

Acceptance above the latter will call for a retest of the $1,850 psychological barrier, beyond which the recent range highs near $1,860 will be put to test.

On the flip side, if the bearish momentum kicks in again, then sellers will target the multi-month lows of $1,810 once again.

The next relevant downside cap is seen at the $1,800 round figure, below which the February 3 low of $1,789 will come into play.