Gold Price Forecast: XAU/USD edges lower in a familiar range amid relentless USD buying

Gold meets with a fresh supply on Friday and is pressured by sustained USD buying.

Aggressive Fed rate hike bets, elevated US bond yields continue to underpin the buck.

Recession fears weigh on investors’ sentiment and could offer support to the XAU/USD.

Gold attracts fresh selling near the $1,675-$1.676 area on Friday and drops to a fresh daily low during the first half of the European session. The XAU/USD is currently placed just below the $1,665 level and remains confined in a familiar trading range held since the beginning of this week.

The US dollar hits a new 20-year peak on the last day of the week and is seen as a key factor exerting downward pressure on the dollar-denominated gold. Adding to this, the prospects for more aggressive policy tightening by the Fed further contribute to driving flows away from the non-yielding yellow metal.

In fact, the markets have been pricing in another supersized 75 bps Fed rate hike move in November. The bets were reaffirmed by the Fed's so-called dot plot, revealing that policymakers expect the benchmark lending rate to top 4% by the end of 2022. From there, central bank officials anticipate further hikes in 2023.

The Fed's hawkish outlook remains supportive of elevated US Treasury bond yields. The yield on the rate-sensitive two-year US government bond touched a fresh 15-year high and the benchmark 10-year Treasury note jumped to its highest level since 2011 on Thursday. This, in turn, should continue to act as a tailwind for the buck.

Meanwhile, faster interest rate hikes by major central banks have stoked concerns of a deeper global economic downturn. This, along with headwinds stemming from China's zero-covid policy and the risk of a further escalation of the war in Ukraine, have been fueling recession fears and weighing on investors' sentiment.

This is evident from the ongoing fall in the equity markets, which could extend support to the safe-haven gold and help limit deeper losses. Even from a technical perspective, the recent range-bound price action points to indecision among traders, warranting some caution before placing aggressive directional bets.

Market participants now look forward to the release of the flash US PMI prints, due later during the early North American session. The focus, however, will remain on Fed Chair Jerome Powell's speech at an event in Washington, which will influence the USD and produce some meaningful trading opportunities around gold.

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Gold Price Forecast: XAUUSD bears eye $1,820 and $1,816 as next targets

Gold Price rebound lacks follow-through bias, as Treasury yields firm up.

USD stays sluggish amid a better mood, ahead of NATO, ECB Forum.

Oil price surge keeps the demand for XAUUSD underpinned.

Optimism prevails, pointing to a turnaround Tuesday for the financial markets, as the previous week’s upbeat global momentum returns and caps the broad US dollar recovery. Investors, however, remain wary ahead of the key NATO Summit and a policy panel of the heads of the Fed, BOE and ECB due later this week. The sluggish price action in the dollar is helping Gold Price recoup a part of Monday’s sharp decline. The upside in the yellow metal lacks traction, however, as the US Treasury yields resume their gradual recovery mode amid lingering recession fears and an aggressive Fed rate-hike track. Buyers also remain cautious, as a slew of key US economic data are due for release later this week, which may prompt markets to re-price the hawkish Fed expectations, in turn impacting gold valuations.

Gold Price: Key levels to watch

The Technical Confluence Detector shows that Gold Price is approaching the strong support around $1,820, where the previous day’s low and the lower band of the four hour Bollinger Band merge.

Selling interest may pick up steam below the latter, exposing the convergence of the previous week’s low, monthly Fibonacci 23.6% retracement and daily S1 pivot point merge at $1,816.

The line in the sand for gold optimists is seen at the weekly S1 pivot point at $1,813.

On the flip side, bulls need to find a strong foothold above the $1,829 barrier, which is the confluence of the 5-day SMA, and the daily and weekly Fibonacci 38.2% retracement level.

The next stop for bulls is aligned at the 10-day SMA at $1,832, above which the daily Fibonacci 61.8% level at $1,835 will come to sellers’ rescue.

Further up, the intersection of the weekly Fibonacci 61.8% level and the R1 daily pivot point at $1,837 will offer stiff resistance.

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Gold Price Forecast: XAU/USD flat-lined around $1,975 region, eyes NFP for fresh impetus

Gold remained on the defensive through the early European session amid hawkish Fed expectations.

The underlying bullish sentiment surrounding the USD further acted as a headwind for the commodity.

A softer risk tone extended some support as investors await the release of the US jobs report (NFP).

Gold reversed modest intraday losses and was last seen trading around the $1,974-$1,975 region, nearly unchanged for the day during the early European session.

The spillover effect from the overnight broad sell-off on Wall Street weighed on investors' sentiment, which was evident from a softer tone around the equity markets. This, in turn, was seen as a key factor that extended some support to the safe-haven gold, though any meaningful upside remains elusive amid the prospects for further policy tightening by the Fed.

Fed Chair Jerome Powell said on Wednesday that a 75 bps rate hike is not under active consideration, though stated that policymakers were ready to approve a 50 bps increase at upcoming meetings. Moreover, the markets are still pricing in a further 200 bps rate hike for the rest of 2022, which remained supportive of elevated US Treasury bond yields.

Apart from this, the underlying bullish sentiment surrounding the US dollar, which held steady near its highest level in two decades, further acted as a headwind for the dollar-denominated gold. The downside, however, seems cushioned as investors wait on the sidelines ahead of the release of the closely-watched US monthly jobs data.

The popularly known NFP report is expected to be consistent with tightening labour market conditions and likely back the case for additional Fed rate hikes. This, along with the emergence of fresh selling on Thursday, suggests that the path of least resistance for the non-yielding gold is to the downside and any attempted recovery could be seen as a selling opportunity.

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