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Gold Price Forecast: XAU/USD bears lurking below key counter trendlines

  • Gold price is sideways as markets consolidate in the holiday period. 
  • The downside bias is in play so long as the bulls are kept at bay below the counter trendlines and $1,800. 

The Gold Price is down some 0.3% and fell from a high of $1,798 to a low of $1,784 on Monday. The yellow metal has struggled to break a technical resistance area on the daily charts despite a soft US Dollar at the start of the week. 

The greenback was lower while traders backed the Euro due to upbeat German business sentiment data supporting EUR/USD higher. A modest improvement in investors' appetite for riskier currencies weighed on the safe-haven US Dollar. The outlook for Europe's largest economy improved despite the energy crisis and high inflation, a survey showed on Monday. The greenback has come under pressure in recent weeks as investors expect a pivot from the Federal Reserve sooner than later. This has been supporting a rise in the Gold price.

However, last week, Chair Jerome Powell said the Fed will deliver more interest rate increases next year despite a possible US recession. In this regard, analysts at Brown Brothers Harriman said, ''we cannot understand why the market continues to fight the Fed.  With the exception of some communications missteps here and there, Federal Reserve chairman Jerome Powell and company have been resolute about the need to take rates higher for longer,'' the analysts noted.

''After the decision, several Fed officials confirmed this message. ''With regards to the latest Dot Plots, the analysts noted that Federal Reserve's John Williams said “it could be higher than what we’ve written down.” Elsewhere, the analysts noted Mary Daly saying “we still have a long way to go. We are far away from our price stability goal.” 

In turn, major US indexes fell for the fourth consecutive session as worries the Federal Reserve's policy path will result in a recession persist, with little in the way of catalysts on the horizon. Although the media embargo has been lifted, there are no Fed speakers scheduled this week. All in all, it has been a battle between signs of economic softness which could translate to a dovish pivot from the Federal Reserve vs. warnings that restrictive interest rates will rise higher and last longer than many might have hoped. Nevertheless, a lack of market catalysts has kept investors largely on the sidelines at the beginning of a likely low-volume, pre-holiday week, 

''After weeks of short covering money managers have started to build long exposure in the gold market once again. With inflation data coming in below expectations, market participants anticipated the upcoming FOMC meeting would tilt firmly toward the dovish side, seeing the yellow metal move above $1,800/oz once again,'' analysts at TD Securities argued.

''But,'' they said, ''while the pace of rate hikes was slowed, the FOMCs' dot plot maintained the Fed's hawkish messaging. In this sense, a continued drawdown in net liquidity from quantitative tightening should begin to weigh on asset prices once more, and higher rates for longer should continue to weigh on precious metals prices in the near term,'' the analysts explained. 

Gold technical analysis

The downside bias is in play so long as the bulls are kept at bay below the counter trendlines and $1,800. 

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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