Gold Price Forecast: XAUUSD seems vulnerable near two-week low, eyes US PCE inflation data

Gold traded with a mild negative bias for the fourth successive day on Thursday and languished near a two-week low touched the previous day. The XAUUSD was last seen hovering around the $1,816 region and was pressured by the prospects for more aggressive rate hikes by the Fed.

Speaking at the ECB's annual forum on Wednesday, Powell said that the US economy is well-positioned to handle tighter policy and that the US central bank remains focused on getting inflation under control. Adding to this, Cleveland Fed President Loretta Mester said that policymakers should act forcefully to curb price pressures. This, in turn, was seen as a key factor that continued acting as a headwind for the non-yielding gold.

That said, a combination of factors held back traders from placing aggressive bearish bets and limited any deeper losses for the XAUUSD. at least for the time being. Despite the Fed's hawkish outlook, the US dollar struggled to capitalize on its two-day-old positive trend amid the ongoing decline in the US Treasury bond yields. This, along with the prevalent risk-off mood, offered some support to the safe-haven gold amid recession fears.

The market sentiment remains fragile amid concerns that rapidly rising interest rates and tighter financial conditions would pose challenges to global economic growth. This continued weighing on investors' sentiment, which was evident from a sea of red across the equity markets and underpinned traditional safe-haven assets.

The mixed fundamental backdrop warrants some caution before positioning for any further depreciating move, through the technical set-up favours bearish traders. The recent attempted recovery moves have repeatedly faced rejection near the very important 200-day SMA and suggest that the bearish trend for gold prices might still be far from over.

Market participants now look forward to the US economic docket, featuring the Core PCE Price Index - the Fed's preferred inflation gauge - and the usual Weekly Initial Jobless Claims. This, along with the US bond yields, will influence the USD price dynamics. Apart from this, the broader risk sentiment might provide a fresh impetus to gold.

Technical levels to watch