Gold Price Forecast: XAU/USD bears brace for Fed’s rate hike around $1,660

Gold price (XAU/USD) portrays the pre-Fed anxiety as bears flirt with $1,665 inside an immediate trading range during Wednesday’s Asian session. That said, the hawkish Fed bets join geopolitical fears to exert downside pressure on the metal. However, the market’s consolidation ahead of the key central bank announcements seems to probe the bears, as well as the already priced 0.75% Fed rate hike.

“The Fed started a two-day meeting on Tuesday, with rate futures traders pricing in an 83% chance of a 75 basis-point hike and a 17% probability of a 100 bps of tightening,” said Reuters. The news joins increasing calls for a positive surprise to weigh on the XAU/USD price. The global economist Nouriel Roubini joined the league of supporters for the Fed’s 1.0% rate hike and favored the metal bears the previous day.

Also, news of a snap lockdown in the steel hub of Tangshan, due to China’s zero covid policy, recently challenged the market sentiment and strengthened the US dollar’s safe-haven demand. On the same line could be the news suggesting US Senators’ demand for secondary sanctions on Russian oil.

Furthermore, the Asian Development Bank (ADB) on Wednesday cut its growth forecasts for developing Asia for 2022 and 2023 amid mounting risks from increased central bank monetary tightening, the fallout from the war in Ukraine and COVID-19 lockdowns in China, reported Reuters. The news exerts downside pressure on the sentiment and the XAU/USD.

Talking about the US data, mostly upbeat US housing data seemed to have propelled the yields to favor DXY bulls. The nine-month downtrend in the US NAHB Housing Market Index precedes the Building Permits to 1.517M in August versus 1.61M forecast and 1.685M prior. However, Housing Starts improved to 1.575M compared to 1.445M market consensus and 1.404M previous readings.

Amid these plays, the US 2-year Treasury yields jumped to the highest level in 15 years while the 10-year counterpart also rose to the 11-year top during the pre-Fed cautious mood. With this, the Wall Street benchmarks closed in the red while the S&P 500 Futures remain indecisive at the latest.

While the market’s indecision is mostly linked to the pre-Fed anxiety, various other central banks are also on the calendar to move the markets and gold prices. However, the attention will be on how all of them manage to avoid recession and still try to tame inflation. If the Fed convinces optimists of their capacity, the odds of an XAU/USD rebound can’t be ruled.

Technical analysis

Gold price holds captive inside a one-week-old $20 trading range as traders brace for the Fed. However, the yellow metal’s latest U-turn from the 100-HMA joins bearish MACD signals and downbeat RSI (14) to suggest the seller’s dominance.

That said, the stated range’s bottom, surrounding $1,660, defends the intraday buyers before directing XAU/USD towards refreshing the yearly low, currently around $1,654.

In that case, the 61.8% and 78.6% Fibonacci Expansion (FE) levels of September 14-16 moves, near $1,647 and $1,638 respectively, could lure the gold bears.

Alternatively, the 100-HMA restricts immediate upside near $1,672 before the aforementioned range’s top, close to $1,680.

It’s worth noting that the XAU/USD run-up beyond $1,680 needs validation from September 14 peak surrounding $1,710 to convince buyers.

Gold: Hourly chart

Trend: Further weakness expected