Gold Price Forecast: XAU/USD reverses Fed Minutes inspired gains, $1,735 in focus

Gold price (XAU/USD) remains on the back foot around a two-week low, taking rounds to $,1761 at the start of Thursday’s Asian session. The precious metal’s latest inaction could be linked to a lack of major data/events. However, mixed US data and rejection of Fed Minutes, after a brief dovish play, join the broad pessimism surrounding the US economy and Fed moves to weigh on the XAU/USD prices, not to forget strong yields and geopolitical fears.

US 10-year Treasury yields rose the most in a week while refreshing the monthly high near 2.90%, which in turn weighed on the Wall Street benchmarks and helped the US dollar to reverse the fall marked after the Federal Open Market Committee (FOMC) meeting minutes. That said, the US Dollar Index (DXY) ended Wednesday’s North American trading session with 0.18% daily gains around 106.70.

The Fed Minutes mentioned that the policymakers strongly supported the 75 bps rate increase in August while seeing a slowing pace of hikes at some point. The Minutes also signaled that Fed officials saw the hazard the Fed could tighten more than necessary.

Elsewhere, US Retail Sales flashed 0.0% growth during July, versus 0.1% expected and a downwardly revised 0.8% prior. The Retail Sales Control Group figures, however, rose to 0.8% compared to 0.6% market consensus and 0.7% prior (revised from 0.8%).

It should be noted that Federal Reserve Governor Michelle Bowman recently mentioned, “High inflation and strong employment will likely create some pressure on labor and employment.”

Elsewhere, China’s Premier Li Keqiang recently crossed wires, via the Communist Party’s flagship newspaper People’s Daily, while urging local officials from six key provinces that account for about 40% of the country’s economy to bolster pro-growth measures. Previously, President Xi Jinping and state planner National Development and Reform Commission (NDRC) showed readiness for more measures to combat the recession fears.

Moving on, second-tier US data may entertain XAU/USD traders with eyes on the central banks and growth concerns, not to forget China.

Technical analysis

Confirmation of the rising wedge bearish chart pattern precedes the yellow metal’s sustained trading below the 50-DMA and 21-DMA to direct XAU/USD bears towards the previous resistance line from April 18, around $1,735 by the press time.

However, a clear downside break of $1,735 won’t hesitate to refresh the yearly low surrounding $1,680 by the press time.

Alternatively, 21-DMA and 50-DMA guard the quote’s immediate upside around $1,765 and $1,776 in that order. Following that the aforementioned wedge’s lower line, near $1,809 at the latest, appears the last defense of the XAU/USD bears.

Gold: daily chart

Trend: Further downside expected