Gold Price Forecast: XAU/USD hangs near multi-week low ahead of US data/FOMC minutes

Gold struggled to capitalize on its modest intraday gains on Wednesday and met with fresh supply in the vicinity of the $1,800 round-figure mark. The intraday pullback dragged spot prices to the $1,786-85 area during the mid-European session, with bears now eyeing to challenge a three-week low touched in the previous day. The US dollar finally broke out of its consolidative trading range and shot to a fresh 16-month peak, which, in turn, exerted some pressure on the dollar-denominated commodity.

The greenback continued drawing support from growing acceptance that the Fed would tighten its monetary policy sooner rather than later to contain stubbornly high inflation. In fact, the Fed funds futures indicated the possibility for an eventual Fed rate hike move by July 2022 and another raise in November. The bets were reaffirmed after Jerome Powell's renomination for the role of the Fed chair for the second term on Monday. This was seen as another factor weighing on the non-yielding gold.

That said, retreating US Treasury bond yields could hold back the USD bulls from placing fresh bets. This, along with a softer risk tone, might benefit the perceived safe-haven gold and help limit losses, at least for now. Concerns about the rising number of COVID-19 cases in Europe and the imposition of fresh lockdown restrictions seem to have tempered investors' appetite for perceived riskier assets, which was evident from a generally weaker trading sentiment around the equity markets.

Nevertheless, the XAU/USD has now drifted into the negative territory for the fifth successive day as market participants look forward to Wednesday's important US macro releases – the Prelim (second estimate) US Q3 GDP, Durable Goods Orders and Core PCE Price Index. Apart from this, the latest FOMC monetary policy meeting minutes will drive the USD demand and provide a fresh impetus to gold prices. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities around the commodity.

Technical outlook

From a technical perspective, the overnight sustained break through the $1.800 mark might have already shifted the bias in favour of bearish traders. That said, acceptance below the 200/100-day SMA confluence and some follow-through selling below the overnight swing low, around the $1,782 region, is needed to confirm the negative outlook. Gold might then accelerate the slide towards the next relevant support near the $1,770 horizontal level en-route the $1,759-58 region.

On the flip side, the $1,795-96 zone, closely followed by the $1,800 mark should act as immediate resistance for the metal. A sustained strength beyond, leading to a subsequent break through the $1,811-12 hurdle could trigger a short-covering move and lift gold prices to the $1,825-26 area en-route the $1,832-34 static resistance.

Gold daily chart

Technical levels to watch