Gold Price Forecast: XAU/USD bears eye $1721 as gold fall extends

Gold (XAU/USD spot vs. the US dollar extended its fall since Wednesday when the FOMC issued the first monetary policy statement of 2022. During the New York session at the time of writing, the XAU/USD is trading at $1,785.

US Core PCE increase higher than expected, Fed policymakers noted

The market sentiment has improved since the US cash equity markets opened. Nevertheless, European equity indices have been unable to get back in the green. Before Wall Street opened, the US Bureau of Economic Analysis unveiled the Federal Reserve favorite gauge of inflation, the Core Personal Consumption Expenditure (PCE) for December, increased by 4.9%, higher than the 4.8% foresee by analysts and 0.2% higher than the November reading. 

Meanwhile, Minnesota Fed President Neil Kashkari said that the Fed needs to bring the US economy in balance by raising interest rates. Kashkari noted that the central bank does not know how many increases will take and emphasized that the Fed would be adjusting as more data comes in.

Later on, he said that “inflation is higher than expected” and expects the Fed to raise rates at the March meeting in an interview with Yahoo! Finance.

Concerns about the US central bank tightening dent the market sentiment

In the meantime, market participants keep digesting the Fed’s awaited change in monetary policy stance. Although the monetary policy statement was viewed as a “hawkish hold,” the initial reaction was no surprise. Nevertheless, Fed’s Chair Powell press conference rocked the boat, saying that “the committee is of a mind to raise the federal funds rate at the March meeting.”

Before Wall Street opened, Minnesota Fed President Neil Kashkari hit the wires. He said that the Fed needs to bring the US economy in balance by raising interest rates. Kashkari noted that the central bank does not know how many increases will take and emphasized that the Fed would be adjusting as more data comes in.

The US economic docket just featured the University of Michigan Consumer Sentiment for January on its final reading, which came at 67.2 lower than the 68.7 expected.

XAU/USD Price Forecast: Technical outlook

Gold is trading near the bottom of a Pitchfork’s channel, drawn from the beginning of December, as depicted by the daily chart. That trendline intersects with a downslope trendline, drawn from August 2020 swing highs, acting as resistance for the non-yielding metal around $1,790-$1,800. Furthermore, the daily moving averages (DMAs) reside above the spot price. Therefore, XAU/USD is downward biased.

The first support level would be December 15, 2021,  swing low at $1,753. A breach of the latter would expose October 6, 2021, a daily low at $1746, followed by September 29, 2021, a low at $1,721.