Gold Price Forecast: XAU/USD bears attack $1,688 support amid strong yields, hawkish Fed bets

Gold price remains pressured towards the key support line from late July during three-day downtrend.
Recession woes, firmer US data underpin hawkish Fed bets and strong US dollar.
China trade numbers, Fedspeak will be important for fresh clues.

Anil Panchal FXStreet

Gold price (XAU/USD) remains on the back foot at around $1,695 while portraying the three-day downtrend during Wednesday’s Asian session. The precious metal justifies firmer US dollar strength amid a risk-off mood and higher yields. Also exerting downside pressure on the bullion are the hawkish Fed bets ahead of multiple speeches from the Fed policymakers including Chairman Jerome Powell.

US Dollar Index (DXY) stays firmer around the highest levels in 20 years, up 0.22% intraday near 110.50 at the latest, as firmer US data joined growing calls of the Fed’s aggression in September.

That said, US ISM Services PMI rose to 56.9 versus 55.1 market forecast and 56.7 prior. However, the S&P Global Composite PMI and Services PMI eased to 44.6 and 43.7, respectively versus 45.0 and 44.1 initial forecasts in that order. Even so, the US Dollar Index (DXY) rose after the release and refreshed a 20-year high. It should be noted that the CME’s FedWatch Tool signals a 72.0% chance of 50 basis points (bps) Fed rate hike in September versus 57% one-day ago.

Additionally, the energy crisis and China’s covid woes also weigh on the XAU/USD prices as traders await the key data/events for the week, namely the European Central Bank (ECB) monetary policy meeting and Fed Chair Powell’s speech.

While portraying the mood, Wall Street closed in the red while the 10-year US Treasury yields jumped the most in a month to poke the highest levels since mid-June. It’s worth noting that the S&P 500 Futures print mild losses.

China’s monthly trade numbers will precede the Fedspeak to direct short-term gold price moves. Above all, fears of an economic slowdown could weigh on the XAU/USD.

Technical analysis

Gold price extends the previous day’s pullback from the 10-DMA and a three-week-old resistance line amid bearish MACD signals.

With this, the XAU/USD sellers are all set to break an upward-sloping support line from late July, around $1688.

The yearly low near $1680 may offer an intermediate halt during the metal’s slump targeting multiple lows marked during 2021 around $1677.

Alternatively, the 10-DMA and the aforementioned resistance line, around $1,718 and $1722 in that order, restrict the short-term upside of the gold price.

Gold: Daily chart

Trend: Further weakness expected

Additional important levels

Overview
Today last price	1696.26
Today Daily Change	-5.90
Today Daily Change %	-0.35%
Today daily open	1702.16

Trends
Daily SMA20	1746.81
Daily SMA50	1749.71
Daily SMA100	1802.64
Daily SMA200	1834.42

Levels
Previous Daily High	1726.84
Previous Daily Low	1699.87
Previous Weekly High	1745.58
Previous Weekly Low	1688.92
Previous Monthly High	1807.93
Previous Monthly Low	1709.68
Daily Fibonacci 38.2%	1710.17
Daily Fibonacci 61.8%	1716.54
Daily Pivot Point S1	1692.41
Daily Pivot Point S2	1682.65
Daily Pivot Point S3	1665.44
Daily Pivot Point R1	1719.38
Daily Pivot Point R2	1736.59
Daily Pivot Point R3	1746.35

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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