FX

Gold Price Forecast: XAUUSD remains depressed around $1,810 area amid fresh USD buying

  • Gold witnessed selling for the second straight day on Wednesday amid modest USD strength.
  • Aggressive Fed rate hike bets, rising US bond yields helped the USD to stall its recent downfall.
  • Recession fears weighed on investors’ sentiment and could lend support to the safe-haven metal.

Gold edged lower for the second successive day on Wednesday and extended the previous day’s rejection slide from the very important 200-day SMA. The XAUUSD remained on the defensive through the early European session and was last seen trading around the $1,810 region, down over 0.50% for the day.

The emergence of some US dollar dip-buying – bolstered by the prospects for a more aggressive policy tightening by the Fed – turned out to be a key factor that undermined the dollar-denominated gold. In fact, the markets seem convinced that the Fed would need to take more drastic action to bring inflation under control. The bets were reinforced by upbeat US Retail Sales data and Fed Chair Jerome Powell’s hawkish remarks on Tuesday.

Speaking at a Wall Street Journal event, Powell said that he will back interest rate increases until prices start falling back toward a healthy level. The markets were quick to react, which was evident from some follow-through uptick in the US Treasury bond yields. This further contributed to the offered tone surrounding the non-yielding gold, though concerns about softening global growth might help limit deeper losses, at least for now.

Investors remain worried about the potential economic fallout from the Russia-Ukraine war and the COVID-19 lockdowns in China. The mixed fundamental backdrop warrants caution for aggressive traders, though the overnight failure near a technically significant moving average supports prospects for further losses. That said, it will be prudent to wait for a break below the $1,800 mark before positioning for an extension of a one-month-old downtrend.

Market participants now look forward to the US housing market data – Building Permits and Housing Starts – for some impetus. Apart from this, the US bond yields will influence the USD price dynamics. Traders will further take cues from the broader market risk sentiment to grab short-term opportunities around gold.

Technical levels to watch

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