Gold Price Forecast: XAU/USD conquers the 200-DMA but remains weak at around $1840s

Gold spot (XAU/USD) is almost flat on the day, in a choppy trading session on Friday, as market players’ sentiment shifted negatively, as reflected by US equities tumbling between 0.67% and 1.76%, while the greenback recovers some ground, after falling from YTD highs at around 105.00. At $1843.03, XAU/USD is set to finish the week with decent gains, snapping four straight weeks of losses.

Sentiment remains negative due to the option expiring

Early in the North American session, a buoyant market mood courtesy of the People’s Bank of China (PBoC) 15-bps rate cut to its 5-year LPR was cheered by investors as Asian and European equities finished with gains. Nevertheless, in the mid-New York session, the mood turned sour. Analysts attribute the shift to options expiring on equities and ETFs, which triggered high volatility, and sent the Dow Jones Industrial and the Nasdaq to fresh 52-week lows.

Gold remains to trade in familiar ranges amidst the lack of a catalyst. Fed policymakers throughout the week have emphasized the need to bring inflation down, and the majority of them telegraphed its stance about hiking rates by 50-bps at least in the June and July meetings. Others like Philadelphia Fed’s Patrick Harker added that he is less worried about a deep recession and is not forecasting it. Meanwhile, Minnesota Fed’s Neil Kashkari said he sees evidence of a long-term high inflation regime and expressed that the central bank needs to be more aggressive.

In the week ahead, the US economic docket will feature S&P Global PMIs, the release of the last Fed’s FOMC meeting minutes, Jobless Claims, and the Fed’s favorite gauge for inflation, the Personal Consumption Expenditure (PCE) for April.

Gold Price Forecast (XAU/USD): Technical outlook

Although it is above the 200-DMA, which lies at $1838.61, Friday’s Gold price action is still vulnerable to further selling pressure. XAU/USD’s bulls, to ease the downward pressure, need to reclaim the 20-DMA at $1858.41, a level that would leave Gold comfortably trading in the $1838-58 range, before finding a fresh impetus to continue its climb towards the 100-DMA at $1885.75.

Nevertheless, until the above scenario plays out, Gold’s path of least resistance is neutral-downwards. XAU/USD’s first support would be the 200-DMA at $1838.62. Break below would expose the two-year-old upslope trendline around $1820-30, followed by the bottom band of the Bollinger’s band indicator at $1798.05, immediately followed by the YTD low at $1780.18.