Gold Price Forecast: XAU/USD drops below $1750 on risk-off due to China’s Covid protests

• Gold price tumbles below $1750 on traders’ negative sentiment, spurred by geopolitical reasons.
• China’s Covid-19 riots across the country keep Gold on the defensive.
• Soft US Dollar, courtesy of the Fed’s moderating rate hikes, stalled the XAU/USD downfall.
• US Dollar to get direction on a busy economic calendar in the United States.
• Gold Price Analysis: Neutral-upwards, but capped around the $1725-$1770 range.

Gold price edges lower as trading in the United States (US) begins after hitting a daily high of $1763.75. China’s protests about its Covid-19 zero-tolerance policy and its economic consequences weigh on sentiment even though Federal Reserve (Fed) officials laid the ground for moderated rate hikes. A busy economic calendar in the United States might cap last week’s losses in the US Dollar (USD) after the Fed’s dovish November minutes. At the time of writing, the XAU/USD is trading at $1747.11, below its opening price by 0.40%.

Negative sentiment spurred by China's crisis keeps Gold defensive

Global equities are trading in the red, spurred by China’s civil unrest, as protesters take the streets sparked by the Covid-19 zero-tolerance policy and mass testing. According to Bloomberg, “the protests are shaping up one of the biggest threats to the Communist Party since the 1989 Tiananmen crackdown,” keeping investors on their toes. However, Gold’s safe-haven status kept the yellow metal from falling further while also benefitting from a soft US Dollar.

Federal Reserve ready to moderate borrowing costs increases

Since the last couple of weeks, Federal Reserve policymakers opened the door to some moderation in the pace of interest-rate increases. However, they emphasized that inflation is too high and that the Federal Funds rate (FFR) peak would be higher than September’s projections. It should be noted that the Federal Reserve Open Market Committee (FOMC) minutes for the last meeting indicated that “A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” further confirming the aforementioned.

Of late, the Cleveland Federal Reserve President Loretta Mester stated that she does not believe that the Fed is close to a pause on tightening, reiterating its hawkish stance. Traders should know that Mester expects the FFR to end at around 5%.

Busy economic calendar in the United States

In the meantime, the US docket will be busy. On the labor market side, the release of November’s ADP Employment Change report, October’s JOLTs Job Openings, Initial Jobless Claims for the last week, and the Nonfarm Payrolls for November would update the employment situation. Regarding the PMIs, the ISM Manufacturing PMIs would be released alongside the Chicago PMI and the S&P Global PMI.

On the Fed speaking side, ahead of the blackout period, for the December meeting, Williams, Bullard, Cook, Bowman, Logan, Barr, Evans, and Powell will speak during the week.

Gold Price Analysis (XAU/USD): Technical outlook

XAU/USD remains neutral-upward biased, as shown by the daily chart. However, it should be noted that in the last week, Gold’s failure to crack the $1770 resistance exacerbated a fall towards $1725.71 the previous week’s low, but a “packed” economic calendar could impact the yellow metal price in the second half of the week.

Upwards, the XAU/USD first resistance would be $1750, followed by the daily high of $1761.18. As an alternate scenario, XAU/USD first support would be $1725.71, followed by the 100-day Exponential Moving Average (EMA) at $1711.74, followed by $1700.