Gold price struggles to capitalize on its modest intraday gains beyond the $1,850 area on Tuesday and remains well below a nearly three-week high touched the previous day. The XAU/USD languishes below the $1,845 level through the first half of the European session as traders await a testimony by Federal Reserve (Fed) Chair Jerome Powell before placing fresh directional bets.
Jerome Powell’s testimony eyed for clues about the future rate-hike path
Powell’s remarks will be closely scrutinized for clues about the Fed’s future rate-hike path, which, in turn, will play a key role in influencing the near-term trajectory of the non-yielding Gold price. Several policymakers recently backed the case for higher rate hikes. They opened the door for a 50 bps lift-off at the upcoming Federal Open Market Committee (FOMC) meeting later this month.
Moreover, the incoming macro data from the United States (US) indicated that inflation isn’t coming down quite as fast as hoped and pointed to an economy that remains resilient despite rising borrowing costs. Hence, a more hawkish commentary will offset any near-term positive outlook for the XAU/USD and shift the bias back in favor of bearish traders.
Retreating US bond yields, subdued US Dollar demand, and recession fears lend support
Some market participants, however, are unsure about Powell’s tone amid expectations that the US economy might be cooling. This, in turn, prompts some repositioning trade, evident from a modest pullback in the US Treasury bond yields, and keeps the US Dollar (USD) bulls on the defensive.
Heading into the critical event risk, a subdued USD price action supports the US Dollar-denominated Gold price. Apart from this, looming recession risks further limit the downside for the safe-haven XAU/USD, at least for now. This, in turn, warrants caution for aggressive bearish traders before positioning for any meaningful retracement slide from a multi-week high touched the previous day.
Traders might refrain from placing directional bets around the Gold price
Hence, strong follow-through selling is needed to confirm that the recent recovery from the vicinity of the $1,800 round-figure mark, or the YTD low touched on February 28, has run its course. Without any relevant market-moving economic releases from the US, the US bond yields could drive the USD demand and provide some impetus to Gold prices.
Traders will take cues from the broader market risk sentiment to grab short-term opportunities around the XAU/USD, though any meaningful movement in either direction seems unlikely.
Gold price technical outlook
From a technical perspective, the $1,835 horizontal zone will likely protect the immediate downside. Any subsequent decline might find some support near the $1.822-$1,821 area ahead of the $1,810 level and last week’s swing low, near the $1,805-$1,804 region. This is closely followed by the $1,800 round-figure mark, which coincides with the 100-day Simple Moving Average (SMA). A convincing break below the latter will be seen as a new trigger for bearish traders, making gold prices vulnerable to slide further.
On the flip side, the $1,856-$1,858 region seems to have emerged as an immediate hurdle, above which the XAU/USD could climb to the 100-day SMA, currently around the $1,870 area. This should act as a pivotal point, which, if cleared decisively, will set the stage for a further near-term appreciating move and allow bulls to reclaim the $1,900 mark with some intermediate barrier near the $1,884-$1,886 supply zone.