Gold Price Forecast: XAU/USD drops to a 10-day low, on risk-on impulse ahead of Powell’s speech

Gold price (XAU/USD) traded to the downside on Tuesday despite investors’ perception that the Federal Reserve (Fed) may be nearing the end of its rate-tightening campaign. This is due to gradually easing consumer inflation and higher US Treasury yields, which have tightened financial conditions. At the time of writing, XAU/USD exchanges hands at $1969.09, almost flat after hitting a ten-day low of $1956.81.

XAU/USD remains under pressure amid higher US Treasury yields and mixed signals from Federal Reserve officials

Wall Street portrayed an upbeat sentiment, hence a headwind for safe-haven assets. Federal Reserve officials continued to cross newswires, led by Fed Governor Lisa Cook. She commented on Monday that the current interest rate policy is sufficiently restrictive to achieve price stability.

Further Fed commentary witnessed Minnesota’s President Neil Kashkari raising questions about whether current policy is tight enough given the strength of the economy and mentioned that an increase in inflation could justify further tightening.

On the other hand, Chicago Fed President Austan Goolsbee acknowledged progress in controlling inflation and suggested that the focus of the conversation might shift to how long interest rates need to remain at their current level.

Of late, Fed Governor Michelle Bowman emphasized the possibility of the Fed needing to raise interest rates further to combat inflation. However, she also recognized the impact of rising Treasury yields on financial conditions.

What to watch?

Federal Reserve Chairman Jerome Powell's commentary on Wednesday will be closely watched, as it may provide insights into whether investors should anticipate additional interest rate hikes this year to achieve the Fed's 2% inflation target.

XAU/USD Technical Levels