Gold Price Forecast: XAUUSD bulls lose grip as investors reassess future Fed rate hikes

• Gold retreats further from a multi-month top and is pressured by a modest USD uptick.
• Wednesday’s upbeat US Retail Sales cast doubt on a less hawkish Fed and lifts the buck.
• Depressed US bond yields and the risk-off mood could offer some support to the metal.

Gold extends the previous day's retracement slide from its highest level since mid-August and remains under some selling pressure for the second successive day on Thursday. The initial market reaction to the latest geopolitical development fades rather quickly after early information points to the missile that hit Poland on Tuesday being accidentally fired by Ukrainian forces. This, along with the emergence of some US Dollar buying during the Asian session, contributes to the offered tone surrounding the dollar-denominated commodity.

The better-than-expected release of the US Retail Sales data on Wednesday cast doubts on the peak inflation narrative. The US Census Bureau reported that the headline sales rose 1.3% in October, up sharply from a flat reading in the previous month. Furthermore, sales excluding autos surpassed consensus estimates and climbed 1.3% during the reported month, a sign of consumer resilience. This forced investors to trim their bets for a less aggressive policy tightening by the Fed and offers some support to the buck.

That said, several FOMC members backed the case of smaller interest rate hikes in the coming months. Moreover, the markets have been pricing in a greater chance of a 50 bps lift-off at the next FOMC policy meeting in December. This keeps the yield on the benchmark 10-year US government bond depressed near its lowest level since early October and could help limit losses for the non-yielding gold. Apart from this, the risk-off impulse might hold back bearish traders from placing aggressive bets around the XAUUSD.

Nevertheless, spot prices slide back closer to the weekly low and remain at the mercy of the USD price dynamics. Market participants now look forward to the US economic docket, featuring the release of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims. Apart from this, speeches by a slew of influential FOMC members will drive the USD demand and provide some meaningful impetus to gold. Traders will further take cues from the broader risk sentiment to grab short-term opportunities around the XAUUSD.

Technical Outlook

From a technical perspective, the weekly low, around the $1,753 region, might protect the immediate downside ahead of the $1,745 area. The latter coincides with the 23.6% Fibonacci retracement level of the recent rally witnessed over the past two weeks or so, below which gold is likely to extend the ongoing corrective pullback. The next relevant support is pegged near the 200-hour SMA, currently around the $1,732-$1,731 region, also marking a strong horizontal resistance breakpoint. Some follow-through selling could drag the XAUUSD towards the $1,720 level, or the 38.2% Fibo. level, en route to the $1,700 mark. Failure to defend the aforementioned support levels will suggest that the positive momentum has run out of steam and shift the near-term bias in favour of bearish traders.

On the flip side, the 100-hour SMA, currently near the $1,768 region, now seems to cap the immediate upside. A sustained strength beyond has the potential to lift gold back towards the multi-month peak, around the $1,783-$1,786 region. Bulls might then aim to reclaim the $1,800 psychological mark. The said handle coincides with a technically significant 200-day SMA, which if cleared decisively should pave the way for a further appreciating move. Some follow-through buying beyond the $1,808-$1,810 area will reaffirm the constructive outlook and set the stage for a more towards the $1,830 intermediate hurdle en route to the $1,875 supply zone.