Gold Price Forecast: XAU/USD drops below $1750, but buyers defend $1720 support

• Gold Price drops close to 0.80% on a strong US Dollar.
• Last week Federal Reserve’s hawkish commentary still weighed on investors’ mood.
• Gold Price Forecast: Supported around $1727, if broken, will expose the 100-DMA.

Gold Price grinds lower amidst a risk-off impulse, which triggered a flight to safe-haven assets. The US Dollar (USD) remains underpinned by investors’ concerns that the recent Covid-19 outbreak in China could spur authorities to reimpose restrictions. Therefore, the precious metals segment is down, as shown by the XAU/USD trading at $1735, below its opening price by 0.87%.

Buoyant US Dollar weighs on Gold Prices on sour sentiment

Sentiment remains negative, as shown by Wall Street posting losses between 0.32% and 1.08%. The financial markets narrative has not changed since October’s Consumer Price Index (CPI) report from the United States (US), which cooled down, while the Producer Price Index (PPI) followed suit. Even though both reports showed that prices are stabilizing, speculations that the Federal Reserve (Fed)  might pause hiking rates were used to spur a rally in equities, which weighed on the US Dollar. However, last week’s solid US Retail Sales data increased the likelihood that the Fed would continue tightening conditions.

In that regard, US Federal Reserve officials continued to express their commitment to bringing inflation toward their 2% goal, but they said that the pace of hikes could moderate as soon as the December meeting. However, St. Louis Fed President James Bullard spooked investors, saying rates are not “sufficiently restrictive” and adding that he expects the Federal Funds rate (FFR) to peak at around 5% to 6%. Echoing some of his comments was Atlanta’s Fed President Raphael Bostic, adding that he supports slowing the rhythm of interest-rate increases and foresees 75 to 100 bps additional tightening to the FFR.

Data-wise, the US economic calendar featured the Chicago National Activity index falling to negative territory in October, to -0.05 from 0.17 in September, which triggered to reaction in the XAU/USD. In the meantime, the US Dollar Index, a measure of the buck’s value against its peers, extends its gains by 0.93%, at 107.967, registering a fresh one-week high.

Elsewhere, US Treasury bond yields are extending their gains, particularly the 10-year benchmark note rate yielding 3.818%, underpinning the USD. Another headwind for Gold Prices is Real yields, which are calculated by the US 10-year nominal yield minus inflation expectations for the same period, which remains positive at 1.71% as of last Friday’s close.

Ahead into the week, the US docket will feature Fed regional manufacturing indices alongside further Fed speaking.

Gold (XAU/USD) Price Forecast: Technical outlook

Gold Price remains neutral-to-upward biased, comfortably above the $1700 psychological level, though the Relative Strength Index (RSI) slope aims downward, accelerating towards its midline. If RSI’s central line is crossed, it will exacerbate XAU/USD’s fall towards the 100-day Exponential Moving Average (EMA) at $1711, ahead of the abovementioned $1700 figure. XAU/USD key resistance levels lie at $1750, followed by November’s high of $1786, ahead of the $1800 mark.