Gold Price Forecast: XAU/USD bears moving in and taking out first key H4 support level

At $1,880.40, gold is under pressure in the open on Monday down 0.17% and has fallen from a high of $1,885.85 to a low of $1,879.93 as the bears move in again with a focus on last week's lows at $1,850.47.

China’s COVID-19 outbreaks have darkened the outlook for risk sentiment at the start of the week. Reuters reports that Shanghai is tightening its already strict COVID-19 lockdown in a fresh push to eliminate infections outside quarantined areas of China’s biggest city by late this month.

Traders await yet further data from the Middle Kingdom that is speculated to show a further slowing in export growth and weakness in imports with most provinces under some form of restrictions and Shanghai in a full month of lockdown.

''China top leaders warned against questioning Xi Jinping’s covid-zero strategy as pressure builds to relax virus curbs,'' analysts at ANZ said. ''This comes as the market battles headwinds such as a stronger USD and a bond selloff as the US Federal Reserve tightens it monetary policy. These same issues weighed on gold prices, which recorded its third weekly drop,'' the analysts added.

''With further supply constraints across the base metals complex still a distinct possibility, the recent selloff appears overdone. Chinese demand is expected to rebound sharply once restrictions ease, with stimulus measures likely to boost economic activity.''

Key data ahead

Meanwhile, for the week ahead, other than today's Chinese trade data, the focus will be on US inflation data and Fed speakers. Analysts at TD Securities argue that core prices likely stayed strong in April, regaining momentum to 0.5% m/m after recording 0.3% in March. ''While used vehicle prices likely declined again, they probably fell less sharply than in the last report. We also look for renewed strength in shelter inflation. Our MoM forecasts imply 8.1%/6.1% YoY for total/core prices, likely confirming March was the peak of the cycle.''

A slew of Fed officials will be providing remarks in the upcoming week following the May meeting. New York Fed's John Williams and Governor Christopher Waller's remarks will be important and would be expected to shed some light after Fed Chairman Jerome Powell's presser last week that failed to offer much in the way of clarity on what the Fed will do after frontloading rate hikes until neutral. 

Gold technical analysis

• Gold, Chart of the Week: Bears eye a break of critical $1,875

The bearish close and wick on the weekly chart would be expected to be followed by a move lower in the coming days to test last week's low and potentially move beyond. In trade today, the bears are challenging the bulls at the first layer of 4-hour support: