Gold Price Forecast: XAUUSD slides under $1900 as USD rally hits commodities

  • Gold Prices recently slid below the $1900 level for the first time in nearly one month and are now testing support. 
  • A break below $1890 support would open the door to selling pressure towards the 200DMA at $1830. 
  • Ahead, gold traders will be watching US data including GDP and Core PCE results, as well as geopolitical risk. 

A rally in the US dollar and slump in prices across commodity markets on Monday has put spot gold (XAU/USD) prices firmly on the back foot to start the week. Indeed, spot prices recently slipped under the $1900 level for the first time since 29 March, and, at current levels around $1895, are eyeing a test of last month’s lows at $1890.

Traders are citing concerns about widening lockdowns in China as the major driver of the recent downturn energy and industrial metal prices, and this is resulting in a pairing back in inflation expectations, weighing on precious metals. Meanwhile, risk-off flows and weakness in the yuan are boosting the buck, raising the cost of USD-denominated gold for foreign buyers. 

Some gold bulls might be tempted to reload longs at current levels, however. Firstly, support in the $1890s has held up well in recent weeks and, with US yields pulling back off highs a touch amid increased safe-haven demand, this support may well hold. Indeed, the latest commentary on the Russo-Ukraine front suggests that peace talks remain at an impasse, and that the stagflationary risks presented by the war remain a key risk to the outlook. 

The Upcoming Week

Looking ahead, gold traders will also be focused on US data this week, the highlights including the first estimate of Q1 2022 GDP and March Core PCE inflation. That should keep focus on the fact that the Fed and other major central banks look very much on autopilot towards higher interest rates, even if there are no Fed speakers scheduled to appear this week to remind us of this. For reference, the Fed is in blackout ahead of next week’s policy meeting.

If the most recent pullback in US yields does prove short-lived, then risks remain tilted to the downside for gold this week. A break below $1890 support would open the door to a push lower towards the 200-Day Moving Average at $1830. 

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