Gold Price Forecast: XAU/USD bears eye $1,715-13 amid hawkish Fed bets, recession woes

Gold price (XAU/USD) fades the late Monday’s corrective pullback from a monthly low as sellers tighten grinds during Tuesday’s Asian session. In doing so, the yellow metal bears the burden of the firmer US dollar amid the market’s rush for risk safety.

US Dollar Index (DXY) rose to the six-week high the previous day, and also printed a four-day uptrend, amid fears of recession and increasing hawkish Fed bets. Recently helping the XAU/USD bears are chatters surrounding Russia’s likely aggressive invasion of Ukraine’s infrastructure.

Reuters quotes an anonymous US official to mention that Russia is preparing strikes on Ukraine's infrastructure in the coming days. Meanwhile, the New York Times (NYT) reported that the US is sending more weapons to Ukraine to aid counterattack.

Elsewhere, Russia’s unscheduled maintenance of the Nord Stream 1 pipeline unveiled a blow to the struggling Eurozone economy amid the energy crisis. The fears grew stronger as the firmer US data indicated the Fed’s aggression.

Germany’s monthly report from Bundesbank signaled that a recession in Germany is increasingly likely while also suggesting that inflation will continue to accelerate and could peak at more than 10%. Before that, Bundesbank President, as well as the European Central Bank (ECB) policymaker, Joachim Nagel mentioned that the ECB must keep raising interest rates even if a recession in Germany is increasingly likely, as inflation will stay uncomfortably high all through 2023. On the contrary, German Economy Minister Robert Habeck stated, “A good chance to get through winter without drastic energy measures.”

Talking about the US data, Chicago Fed National Activity Index improved to 0.27 in July, from a downwardly revised -0.25 prior.

“Fed funds futures on Monday have priced in a 54.5% chance of a 50 basis-point (bp) rate hike at the Fed's policy meeting next month. The fed funds rate is seen hitting roughly 3.6% by the end of the year, with a peak rate of nearly 3.8% in March 2023,” mentioned Reuters following the latest market data.

Against this backdrop, S&P 500 Futures print mild gains as traders lick their wounds after Wall Street saw the red and the yields rose to a fresh monthly high.

To sum up, the gold price stays on the bear’s radar amid a firmer US dollar. However, the greenback’s further advances hinge on this week’s speech from Fed Chair Jerome Powell at the annual Jackson Hole Symposium, up for release on Friday. It should be noted that preliminary readings of the US PMIs for August may entertain intraday traders.

Technical analysis

Gold price extends the previous week’s downside break of the 21-DMA amid bearish MACD signals.

Given the safe distance of the RSI (14) from the oversold territory, the XAU/USD is likely to extend the latest south-run towards a five-week-old horizontal support area surrounding $1,715-13.

However, the yearly low and a downward sloping support line from mid-May, respectively around $1,680 and $1,630, could challenge the metal bears afterward.

On the flip side, a one-week-old resistance line, close to $1,745 at the latest, guards the short-term XAU/USD rebound ahead of the 21-DMA hurdle of $1,767.

Following that, a 10-week-long resistance line, near $1,790 at the latest, becomes crucial to watch for the gold buyers.

Gold: Daily chart

Trend: Further weakness expected