Gold Price Analysis: XAU/USD consolidates around $1,735 level, Powell’s speech awaited

Gold remained depressed through the Asian session on Thursday, albeit lacked any strong follow-through selling. The commodity was last seen hovering around the $1,735 region, above the overnight swing lows.

The precious metal stalled its intraday retracement slide from the $1,745-46 supply zone and managed to find some support near the $1,730 area on Wednesday. Minutes from the latest FOMC meeting held on March 16-17 confirmed that the central bank is not rush to hike rates. This was seen as a key factor that extended some support to the non-yielding yellow metal.

Investors, however, seemed convinced that a relatively faster US economic recovery from the pandemic will force the Fed to raise interest rates sooner than anticipated. The optimistic outlook for the US economy remained well supported by the impressive pace of coronavirus vaccinations and US President Joe Biden's infrastructure spending plan.

The reflation trade has been fueling speculations about an uptick in US inflation and raised doubts that the Fed will retain ultra-low interest rates for a longer period. This, in turn, pushed the US Treasury bond yields higher, which helped revive demand for the US dollar and kept a lid on any meaningful upside for the dollar-denominated commodity.

Apart from this, the underlying bullish tone in the financial markets further weighed on the safe-haven XAU/USD. Despite the combination of negative factors, the downside remains cushioned, at least for the time being, as investors seemed reluctant to place any aggressive bets ahead of a scheduled speech by the Fed Chair Jerome Powell, due later this Thursday.

Hence, it will be prudent to wait for some strong follow-through selling before confirming that the recent bounce from multi-month lows has run its course and positioning for any further decline. The $1,720 region remains a key pivotal point for the XAU/USD, which if broken decisively will set the stage for the resumption of the prior/well-established bearish trend.

Technical levels to watch