Gold Price Forecast: XAUUSD could stage a solid comeback on dovish Fed rate hike

The narrative of aggressive Fed tightening tipping the US economy into a recession continued to play out across the financial markets on Tuesday, keeping the flight to safety theme intact. This revived the US dollar’s haven demand while the Treasury yields surged to the highest level since 2002, as a 75 bps Fed rate hike got confirmed. The dour mood on Wall Street also prompted to seek refuge in the buck.

Against this backdrop, gold price extended the previous day’s losses and refreshed monthly lows at $1,805. The slump in the GBP/USD pair on deepening fears over the UK economic outlook collaborated with the upsurge in the dollar, adding to the weight on the yellow metal.

In the run-up to the Fed showdown, gold price is attempting a bounce amid a pullback in the dollar alongside the Treasury yields. The improvement in the market sentiment combined with the pre-Fed repositioning is weighing the on the greenback while aiding XAUUSD’s rebound.

Looking forward, gold’s fate will remain at the mercy of the Fed outcome, with the fully baked-in 75 bps rate hike to trigger a ‘sell the fact’ reaction in the dollar, which could underpin the bright metal. A 50 bps rate hike could come as a dovish surprise, saving the day for Wall Street indices. Risk flows could return if the Fed delivers a dovish hike that could reduce the dollar demand, boding well for the USD-priced gold.

Gold Price Chart: Four-hour chart

The four-hour chart shows that the rebound in gold price is challenging the upper boundary of a falling wedge formation at $1,817.

A four-hourly candlestick closing above the latter will confirm an upside break from the wedge pattern, calling for a test of the $1,830 round figure.

The bullish target is seen at the downward-sloping 21-Simple Moving Average (SMA) at $1,838.

Further up, the bearish 100-SMA at $1,845 will be put to test. Bulls need a sustained break above the 100 and 200-SMAs confluence at $1,849 to initiate any meaningful recovery.

The 14-day Relative Strength Index (RSI) is flatlined but still remains below the midline, keeping sellers hopeful.

Additionally, the 200-SMA has crossed the 100-SMA for the downside, confirming a bear cross.

Therefore, the possibility of a fresh downswing remains in the offing, which could knock down the rates towards Monday’s low of $1,810.

Tuesday’s low of $1,805 could be a tough nut to crack, below which the $1,800 mark will be under the threat.