Gold Price Forecast: XAU/USD eyes further downside below $1,700 as DXY extends post-Fed rally
- Gold price takes offers to renew intraday low, reverses the previous day’s rebound from yearly bottom.
- DXY rises to fresh 20-year high as risk-aversion intensifies on Fed action, Russian fears.
- Major central bankers’ moves, risk catalysts to direct XAU/USD moves.
Gold price (XAU/USD) remains on the back foot at around $1,660 as bears cheer the firmer US dollar and the risk-off mood during Thursday’s Asian session. That said, the Fed’s hawkish action and Russia-linked fresh geopolitical fears are the latest catalysts that weigh on the metal prices of late.
US Dollar Index (DXY) takes the bids to refresh the two-decade top as it rises to 111.65. In doing so, the greenback’s gauge versus the six major currencies cheers the Fed’s third 0.75% rate hike. The US Federal Reserve (Fed) announced 75 basis points (bps) of a rate hike, the third one in a line of such kind, as it wants to tame inflation fears even at the cost of a “sustained period of below-trend growth” and a softening in the labor market. Fed Chairman Jerome Powell also signaled that the way to tame inflation isn’t painless ahead. While the Fed matched market forecasts, the economic fears surrounding the rate hikes and expectations of another 0.75% increase in November kept the US Dollar on the front foot, despite marking heavy volatility around the announcements.
On the other hand, Russian President Vladimir Putin’s announcement to mobilize partial troops also reignited the Ukraine-linked geopolitical fears and the supply-crunch fears, which offered an initial run-up to oil prices before the latest downside. Recently, Ukrainian President Volodymyr Zelensky said Ukrainian neutrality is out of the question and he rules out that a settlement can happen on a different basis than the Ukrainian peace formula. It should be noted that the Group of Seven (G7) leaders also confirmed cooperation on support for Ukraine.
It should be noted that Goldman Sachs revised down China’s GDP forecasts amid fresh covid woes, which in turn also weigh on the XAU/USD price due to the dragon nation’s status as the key gold consumer.
Amid these plays, the US 10-year Treasury yields bounce back towards the 11-year high marked the previous day, up three basis points (bps) near 3.55% whereas the 2-year counterpart rises 0.75% intraday to 4.085% at the latest, near the highest levels in 15 years. Furthermore, Wall Street closed in the red and the S&P 500 Futures print mild losses by the press time.
Moving on, gold price moves depend upon the central bankers’ actions and the second-tier US data, not to forget the risk catalysts mentioned above.
Technical analysis
A clear U-turn from the 50-SMA, as well as a downside break of the weekly support line, keeps gold sellers hopeful of refreshing the yearly low, currently around $1,654.
In doing so, the lower line of a seven-week-old bearish channel, close to $1,643, will be in focus ahead of the $1,600 threshold and April 2020 bottom near $1,590.
Alternatively, the support-turned-resistance line and the 50-SMA, respectively around $1,665 and $1,685, could restrict short-term recovery moves of the yellow metal.
Even so, the XAU/USD bulls could remain off the table unless witnessing a clear upside break of the stated bearish channel’s resistance line, close to $1,711 at the latest.
Gold: Four-hour chart
Trend: Further weakness expected