Gold Price Forecast: XAU/USD rebound appears elusive amid hawkish Federal Reserve bets

• Gold price picks up bids to pare recent losses, snaps two-day downtrend.
• United States Treasury bond yields, US Dollar pare recent losses but upbeat Federal Reserve bets prod XAU/USD bulls.
• China-inflicted risk aversion also exerts downside pressure on the Gold price.
• China inflation eyed for intraday directions, US Consumer Price Index, Fed Minutes become the key for Gold traders to track.

Gold price (XAU/USD) snaps a three-day losing streak as it prints mild gains around $1,995 while bouncing off a one-week low during Tuesday’s Asian session. In doing so, the metal price consolidates recent losses as the United States Treasury bond yields and the US Dollar retreat. However, the hawkish bets on the Federal Reserve’s (Fed) next moves seem to weigh on the Gold price.

Gold price rebounds as United States Treasury bond yields, US Dollar ease

US Dollar Index (DXY) and the benchmark Treasury bond yields fade recent upside momentum as full markets return. Also challenging the greenback and the bond yields could be the latest comments from the Federal Reserve (Fed) officials and the market’s concerns about the US recession.

That said, Rick Rieder, Chief Investment Officer of global fixed income at BlackRock, the world's largest asset manager, said late Monday, “The Federal Reserve may not need to raise interest rates further to fight inflation, as the fallout from last month's turmoil in the banking sector and a series of recent labor data point to a slowing US economy,” per Reuters.

On the other hand, Federal Reserve (Fed) Bank of New York President, as well as the Fed’s Vice Chairman of the rate-setting committee, John Williams anticipated slower inflation while ruling out the interest rates as culprits for the previous month’s bank fallouts.

With this, the US Dollar Index (DXY) eases to 102.40 while printing the first daily loss in five. On the other hand, the US 10-year and two-year Treasury bond yields retreat to 3.40% and 3.99% at the latest.

Even so, the CME’s FedWatch Tool suggests a 72% chance of the Fed’s 0.25% rate hike in May, versus 57% odds favoring the same in the last week, which in turn keeps the Gold sellers hopeful.

Sino-US tension also weighs on XAU/USD price

Apart from the recent hawkish bets on the Federal Reserve’s (Fed) 0.25% rate hike in May, the looming geopolitical tension between the United States and China also exerts downside pressure on the Gold price, due to the dragon nation’s status as one of the biggest Gold consumers. That said, Beijing marked solid military drills around Taiwan after Taiwan President Tsai Ing-wen’s US visit. However, the end of testing military power seems to have favored the Gold buyers of late. “China ended three days of military drills around Taiwan on Monday saying they had tested integrated military capabilities under actual combat conditions, having practiced precision strikes and blockading the island that Beijing views as its own,” said Reuters.

On the contrary, hopers of more growth in Asia, the key Gold consuming region, seem to help the XAU/USD bulls of late. International Monetary Fund’s (IMF) Managing Director Kristalina Georgieva said that “the global economy is estimated to grow less than 3 percent in 2023, with India and China expected to account for half of the global growth this year.

China inflation eyed for intraday Gold price direction

Looking forward, China’s headline inflation numbers for March, namely the Consumer Price Index (CPI) and Producer Price Index (PPI), will be important for the immediate direction of the Gold price. Given the downbeat forecasts for the inflation numbers, the XAU/USD may witness a pullback. However, major attention will be given to Wednesday’s US Consumer Price Index (CPI) and Fed Minutes.

Gold price technical analysis

Gold price consolidates the previous week’s pullback from an 11-week-old ascending resistance line, backed by Friday’s Doji candlestick.

It should be noted that the bearish divergence between the Relative Strength Index (RSI), placed at 14, and the Gold price challenge the quote’s latest corrective bounce. While portraying the bearish RSI divergence, the Gold price marked higher highs but the RSI (14) printed lower highs, suggesting that the XAU/USD buyers run out of steam.

Further, the looming bear cross on the Moving Average Convergence and Divergence (MACD) indicator also keeps Gold sellers hopeful of witnessing the quote’s further downside.

As a result, the bullion appears well-set to drop towards the $1,960 support confluence, comprising February’s top and a three-week-long ascending trend line.

In a case where the Gold price drops past $1,960, multiple levels marked since mid-January around $1,930-27 can challenge the XAU/USD bears before giving them control.

On the contrary, recovery moves need to stay beyond the $2,000 psychological magnet to lure the Gold buyers. Even so, the aforementioned resistance line from late January, close to $2,040 at the latest, can challenge the upside momentum.

In a case where the quote remains firmer beyond $2,040, the year 2022 high of around $2,070 and the record high marked in 2020 of around $2,075 will be in focus.

Gold price: Daily chart

Trend: Further downside expected