Gold Price Forecast: XAU/USD hangs near multi-month low, remains vulnerable

Gold price enters a bearish consolidation phase during the Asian session on Friday and oscillates in a narrow trading band near the $1,915-$1,916 area, just above its lowest level since March 16 touched the previous day.

Hawkish major central banks act as a headwind for Gold price

A slew of interest rate hikes and a more hawkish outlook by major central banks turn out to be a key factor that continues to act as a headwind for the non-yielding Gold price. In fact, the Bank of England (BoE), the Swiss National Bank (SNB) and Norges Bank all hiked their benchmark interest rates on Thursday. This comes on the back of a surprise 25 basis points (bps) rate hike by the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) earlier this month. Moreover, the European Central Bank (ECB) last week lifted rates to the highest level in 22 years and projected further tightening to bring down inflation.

Modest US Dollar strength contributes to capping XAU/USD

Furthermore, Federal Reserve (Fed) Chair Jerome Powell, during his two-day congressional testimony, reiterated that the central bank will likely raise interest rates again this year, albeit at a "careful pace", to combat stubbornly high inflation. Powell added that the Fed doesn't see rate cuts happening any time soon and is going to wait until it is confident that inflation is moving down to the 2% target. This, in turn, led to the overnight sharp rise in the US Treasury bond yields, which is seen offering some support to the US Dollar (USD) and might further contribute to keeping a lid on the US Dollar-denominated Gold price.

Economic woes could lend support to the safe-haven metal

Investors, meanwhile, now seem worried about economic headwinds stemming from rapidly rising borrowing costs. This is evident from the prevalent cautious mood around the equity markets and helps limit the downside for the safe-haven precious metal, at least for the time being. The upside potential, however, seems limited, warranting some caution for aggressive traders and before positioning for any meaningful recovery. Nevertheless, the Gold price remains on track to register heavy weekly losses and seems poised to extend its recent pullback from the all-time high, around the $2,080 region touched in May.

Traders now look to flash PMI prints for some impetus

Market participants now look forward to the release of the flash Purchasing Managers' Index (PMI) from the Eurozone, the United Kingdom (UK) and the United States (USD). The data will provide fresh cues about the global economic condition and drive demand for traditional safe-haven assets, including the XAU/USD. Apart from this, the US bond yields will influence the USD price dynamics and contribute to producing short-term trading opportunities around Gold price on the last day of the week.

Gold price technical outlook

From a technical perspective, this week's sustained break and acceptance below the 100-day Simple Moving Average (SMA) was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart are holding deep in the bearish territory and are still far from being in the oversold zone. This suggests that the path of least resistance for the Gold price is to the downside and supports prospects for further losses. Hence, a subsequent slide towards the $1,900 mark, en route to the $1,876-$1,875 area and the very important 200-day SMA around the $1,840 region, looks like a distinct possibility.

On the flip side, the $1,924-$1,925 zone now seems to act as an immediate hurdle ahead of the $1,936 area and the 100-day SMA, currently around the $1,942 region. Any subsequent move beyond might continue to attract fresh supply and remain capped near the $1,962-$1,964 region. This is closely followed by resistance near the $1,970-$1,972 zone and the $1,983-$1,985 region. A sustained strength beyond the said barriers might trigger a fresh bout of a short-covering move, allowing the Gold price to surpass the $2,000 psychological mark and climb further towards the $2,010-$2,012 resistance.

Key levels to watch