Gold Price Forecast: XAU/USD bears turn up the heat on committed longs

Gold has continued to slide, backing up from prospects of a bullish breakout as per the technical below. At the time of writing, XAU/USD is down 0.5% and has dropped from a high of $1645.74 to a low of $1,633.49 so far on the day. The yellow metal is heading for its longest streak of monthly losses on record with investors now in anticipation of continued rate hikes from central banks that will cause a strong US dollar and elevated US bond yields.

Looking to positioning data for the greenback, speculators’ net long USD index positions edged lower for a second week but remained essentially consolidative. The debate over whether the Fed is approaching a pivot point on policy has restarted in the market and that leaves scope for further length in the US dollar. 

The sentiment has dented the non-yielding metal's appeal and nudged the bulls back a step further at the start of the week where the Federal Open Market Committee is expected to deliver a fourth consecutive 75bp rate hike this week. Hot US Consumer Price Index, strong growth numbers and conflicting ideas from the likes of WSJ have kept the US dollar underpinned. 

As Reuters wrote in an opening note on Monday, ''the latest round of hopes for a shift in the Fed's tone seems to have stemmed from a Wall Street Journal article two weeks ago, flagging a possible discussion about slowing hikes. But a report from the same author over the weekend pointed to a lengthy period of high rates and traders have now tempered initial optimism, pricing in the funds rate to hit near 5% by May next year.''

This leaves the focus on the Fed chairman's presser. Jerome Powell will talk at a press conference where guidance for future increases could move the needle and after four jumbo-sized hikes. He may want to gauge economic responses before committing to anything besides hiking rates in the face of market speculating that the Fed would slow the pace of rate hikes amid concerns about overtightening.

Meanwhile, the greenback rose 0.8%, making gold more expensive for other currency holders. The benchmark 10-year Treasury yields also edged up at the start of this week. This is now using gold prices into a spiral of more than $400 since climbing above the key $2,000 per ounce level in March.

Gold technical analysis

On the downside, while below the weekly trendline, given that the price has already corrected to a 50% mean reversion of the prior bearish impulse, and considering it has failed to break key resistance so far, there is a strong argument for a downside extension:

The monthly chart could turn out a November candle such as the following: