Gold Price Forecast: XAU/USD struggles even as geopolitical, inflation fears propel US Dollar, yields

• Gold price fades upside momentum within one-month-old bullish channel, pares losses of late.
• Geopolitical concerns about China, Russia weigh on XAU/USD price.
• Inflation woes propel United States Treasury bond yields, US Dollar and provide headwind to Gold Price.
• Central bankers, risk catalysts eyed for fresh impetus ahead of Friday’s Purchasing Managers Indexes.

Gold price (XAU/USD) remains on the way to a consecutive second weekly loss despite being inactive at around $2,000 of late, licking its wounds near $1,995 amid early Thursday. In doing so, the bullion price bears the burden of the market’s pessimism, as well as the firmer US Dollar and Treasury bond yields. However, a light calendar in the United States and a cautious mood seem to restrict the XAU/USD’s downside of late.

Gold price drops on geopolitical, inflation fears

Gold price braces for the second consecutive weekly fall amid fresh geopolitical and inflation concerns. That said, chatters about China and Russia gain major attention when it comes to war fears while the latest data from major economies and comments from the central bankers renew inflation, as well as recession fears of late.

A notable jump in the inflation numbers at the key global economies joined the hawkish comments from the top-tier central bank officials renewed fears of higher rates and recession, which in turn renewed the US Dollar’s haven demand on Wednesday. Adding strength to the risk aversion could be the war fears emanating from China and Russia.

In the last few days, the UK, Eurozone and the US have all been flashing upbeat signals for inflation while the central bank officials from the Bank of England (BoE), European Central Bank (ECB) and the Federal Reserve (Fed) are all favoring higher rates for longer. The same raises the fears of economic slowdown especially when the ex-inflation numbers haven’t been too impressive and the Russia-Ukraine war takes a toll on the global economy.

Recently, New York Fed President John Williams marked support for a 0.25% interest rate hike in May while saying, “Inflation is still too high, and we will use our monetary policy tools to restore price stability.” Just before him was Chicago Federal Reserve Bank President Austan Goolsbee who highlighted credit market strength as one of the key catalysts to watch ahead of the next Fed monetary policy meeting.

Previously, St. Louis Federal Reserve President James Bullard, Richmond Fed President Thomas Barkin and Atlanta Fed President Raphael W. Bostic were the Fed speakers who rekindled the “higher for longer” scenario for rates and favored the US Dollar, as well as yields.

It should be noted that the recently firmer US data and hawkish Fed talks favor the market’s bets on the central bank’s 0.25% rate hike in May, as well as reduce the probability of witnessing a rate cut in 2023. The same joins the inflation and rate hike fears from the other major central banks to propel the US Dollar’s haven demand, which in turn exert downside pressure on the Gold price.

Talking about geopolitical fears, the UK warned that Russian hackers targeting Western critical infrastructure while the US House China Committee discussed the Taiwan invasion scenario. Furthermore, the likely drag on the US debt ceiling decision is due to US President Joe Biden’s hesitance in lifting debt limits. Additionally, Bloomberg released news suggesting China’s role in the Russia-Ukraine war, which in turn adds strength to the risk-off mood.

Apart from what’s already mentioned above, Reuters came out with the news suggesting that US consumers are starting to fall behind on their credit card and loan payments as the economy softens, which in turn also challenges the XAU/USD bulls.

On the contrary, China’s National Development and Reform Commission (NDRC), the state planner, said on Wednesday, the country is formulating plans to boost the recovery and expansion of consumption.  The same join the market’s indecision amid a light calendar and puts a floor under the Gold price.

Hence, multiple challenges to the sentiment and the Gold price keep the XAU/USD bears hopeful.

United States Treasury bond yields, US Dollar recovery weigh on XAU/USD

With the multiple negatives to the risk profile, mentioned above, the market players rush toward selling the United States Treasury bonds, which in turn propel the yields and the US Dollar, as well as provide a headwind to the Gold price. That said, the US 10-year and two-year Treasury bond yields refreshed monthly high the previous day before retreating to 3.60% and 4.26% at the latest. Even so, the US Dollar Index (DXY) grinds higher around 102.00 at the latest.

Qualitative factors are the key for intraday Gold traders to watch

Although a slew of catalysts keeps weighing on the Gold price, the XAU/USD floats higher of late amid a light calendar in the United States, which in turn highlights the risk catalysts. Even so, the Weekly Initial Jobless Claims, Philadelphia Fed Manufacturing Survey and Existing Home Sales will be important to watch for fresh impulse.

Gold price technical analysis

Gold price bounces off the bottom line of a one-month-old ascending trend channel while defending the previous week’s retreat from the Year-To-Date (YTD) high.

Adding strength to the downside bias is the XAU/USD bear’s repeated attack on the 21-DMA, as well as bearish signals from the Moving Average Convergence and Divergence (MACD) indicators.

It’s worth noting that the Relative Strength Index (RSI) line, placed at 14, retreats from the overbought territory and drops towards the normal level of 50, which in turn challenges the Gold sellers.

Hence, the Gold price needs to break the $1,971 immediate support to convince intraday sellers. Even so, February’s high of around $1,960 and the 50-DMA level of near $1,914 can challenge the XAU/USD bears.

Above all, an upward-sloping trend line from November 2022, close to $1,873, acts as the last defense of the Gold buyers.

On the flip side, recovery moves need to sustain the $2,000 breakout on a daily closing basis before approaching the latest peak of $2,048. However, the stated channel’s top line, around $2,051, can check the Gold buyers before directing them toward the previous yearly high of $2,070, as well as the record high marked in 2020 of around $2,075.

Overall, XAU/USD teases sellers but the downside bias remains elusive.

Gold price: Daily chart

Trend: Limited downside expected