Gold Price Forecast: XAUUSD bears retain control, sustained break below $1,800 awaited

• Gold dropped to a one-and-half-month low on Friday and was pressured by a combination of factors.
• The prospects for a more aggressive Fed rate hike, USD strength continued weighing on the commodity.
• Recession fears, the risk-off mood, sliding US bond yields did little to lend any support to the XAUUSD.

Gold prolonged this week's bearish trend and continued losing ground for the fifth successive day on Friday. The downward trajectory dragged spot prices to the key $1,800 psychological mark, or the lowest level since May 16 during the Asian session and was sponsored by a combination of factors. The Federal Reserve’s non-stop chatter about rate hikes to curb soaring inflation continued to weigh on the non-yielding yellow metal. Apart from this, the underlying US dollar bullish trend further undermined the dollar-denominated commodity.

Speaking at the ECB Forum in Sintra on Wednesday, Fed Chair Jerome Powell said that the US central bank remains focused on getting inflation under control. Powell further added that the market pricing is pretty close to the dot plot and that the US economy is well-positioned to handle tighter policy. This reaffirmed bets for more aggressive rate hikes, which assisted the USD to climb back closer to a 20-year high touched on June 15. Bulls failed to gain any respite from the prevalent risk-off mood, which tends to benefit the safe-haven gold.

The market sentiment remains fragile amid concerns that rapidly rising interest rates and tightening financial conditions would pose challenges to global economic growth. Apart from this, a further escalation in tensions between the West and Russia - in response to the latter's invasion of Ukraine - has stoked fears of a possible recession. This, in turn, forced investors to take refuge in safe-haven assets, which was evident from the recent steep decline in the US Treasury bond yields, though did little to ease the bearish pressure around gold.

The mixed fundamental makes it prudent to wait for strong follow-through selling before positioning for any further near-term depreciating move. Market participants now look forward to Friday's release of the flash Eurozone consumer inflation figures and the US ISM Manufacturing PMI for a fresh impetus. Apart from this, the USD price dynamics, the US bond yields, and the broader market risk sentiment would allow traders to grab short-term opportunities around gold on the last day of the week.

Technical outlook

From a technical perspective, the recent repeated failures near the very important 200-day SMA and the subsequent decline favours bearish traders. Sustained weakness below the $1,800 handle will reaffirm the near-term bias and pave the way for additional losses. Gold might then turn vulnerable to challenge the YTD low, around the $1,780 region touched in January. The downward trajectory could further get extended towards the next relevant support near the $1,755-$1,750 zone.

On the flip side, the $1,815-$1,817 region now seems to act as immediate strong resistance. Any subsequent move up might still be seen as a selling opportunity near the $1,833-$1,835 area. This, in turn, should continue to cap the XAUUSD near the 200-DMA. The latter, currently around the $1,845 zone, would act as a key pivotal point, which if cleared decisively will negate any near-term bearish bias and trigger a near-term short-covering move.